Inter-Temporal Differences in the Income Elasticity of Demand for Lottery Tickets

FRB of St. Louis Working Paper No. 2007-042C

41 Pages Posted: 11 Oct 2007

See all articles by Thomas A. Garrett

Thomas A. Garrett

Federal Reserve Bank of St. Louis - Research Division

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division

Date Written: August 4, 2008

Abstract

We estimate annual income elasticities of demand for lottery tickets using county-level panel data for three states and find that the income elasticity of demand (and thus the tax burden) for lottery tickets has changed over time. This is due to changes in a state's lottery game portfolio and the growth in consumer income more so than competition from alternative gambling opportunities. Trends in the income elasticity for instant and online lottery games appear to be different. Our results raise doubts about the long-term growth potential of lottery revenue and have policy implications for state governments and those concerned about regressivity.

Keywords: state lotteries, tax incidence, regressivity, income elasticity

JEL Classification: H71, H22

Suggested Citation

Garrett, Thomas A. and Coughlin, Cletus C., Inter-Temporal Differences in the Income Elasticity of Demand for Lottery Tickets (August 4, 2008). Available at SSRN: https://ssrn.com/abstract=1020737 or http://dx.doi.org/10.2139/ssrn.1020737

Thomas A. Garrett (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Cletus C. Coughlin

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

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