Hitting the Jackpot or Hitting the Skids: Entertainment, Poverty, and the Demand for State Lotteries

26 Pages Posted: 8 Dec 2007

See all articles by Garrick Blalock

Garrick Blalock

Cornell University - School of Applied Economics and Management

David R. Just

Cornell University - Dyson School of Applied Economics and Management

Daniel H. Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Abstract

State-sponsored lotteries are a lucrative source of revenue. Despite their low payout rates, lotteries are extremely popular, particularly among low-income citizens. State officials laud the benefits of lottery proceeds and promote the fun and excitement of participation. This entertainment value is one explanation for lottery demand by the poor: individuals with lower incomes substitute lottery play for other entertainment. Alternatively, low-income consumers may view lotteries as a convenient and otherwise rare opportunity for radically improving their standard of living. Bad times may cause desperation, and the desperate may turn to lotteries in an effort to escape hardship. This study tests these competing explanations. We examine lottery sales data from 39 states over 10 years and find a strong and positive relationship between sales and poverty rates. In contrast, we find no relationship between movie ticket sales, another inexpensive form of entertainment, and poverty rates.

Suggested Citation

Blalock, Garrick and Just, David R. and Simon, Daniel H., Hitting the Jackpot or Hitting the Skids: Entertainment, Poverty, and the Demand for State Lotteries. American Journal of Economics and Sociology, Vol. 66, No. 3, pp. 545-570, July 2007, Available at SSRN: https://ssrn.com/abstract=1061809 or http://dx.doi.org/10.1111/j.1536-7150.2007.00526.x

Garrick Blalock (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

David R. Just

Cornell University - Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States
607-255-2086 (Phone)
607-255-9984 (Fax)

Daniel H. Simon

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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