28 Pages Posted: 9 Jan 2009 Last revised: 24 Jun 2010
Date Written: March 26, 2010
This paper examines whether giving large cash transfers to financially distressed people causes them to avoid bankruptcy. A comparison of Florida Lottery winners who randomly received $50,000 to $150,000 to small winners indicates that such transfers only postpone bankruptcy rather than prevent it, a result inconsistent with the negative shock model of bankruptcy. Furthermore, the large winners who subsequently filed for bankruptcy had similar net assets and unsecured debt as small winners. Thus, our findings suggest that skepticism regarding the long-term impact of cash transfers may be warranted.
Keywords: Lottery; Bankruptcy; Consumer Behavior
JEL Classification: D14; K35; D12
Suggested Citation: Suggested Citation
Hankins, Scott and Hoekstra, Mark and Skiba, Paige Marta, The Ticket to Easy Street? The Financial Consequences of Winning the Lottery (March 26, 2010). Vanderbilt Law and Economics Research Paper No. 10-12. Available at SSRN: https://ssrn.com/abstract=1324845 or http://dx.doi.org/10.2139/ssrn.1324845