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The Ticket to Easy Street? The Financial Consequences of Winning the Lottery

28 Pages Posted: 9 Jan 2009 Last revised: 24 Jun 2010

Scott Hankins

University of Kentucky

Mark Hoekstra

University of Pittsburgh - Department of Economics

Paige Marta Skiba

Vanderbilt University - Law School

Multiple version iconThere are 2 versions of this paper

Date Written: March 26, 2010

Abstract

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

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

Scott Hankins

University of Kentucky ( email )

121 Washington Ave, 105
Lexington, KY 40536-0003
United States

Mark Hoekstra

University of Pittsburgh - Department of Economics ( email )

4714 Posvar Hall
230 S. Bouquet Street
Pittsburgh, PA 15260
United States

HOME PAGE: http://www.econ.pitt.edu/facpage.php?uid=108

Paige Skiba (Contact Author)

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States
615-322-1958 (Phone)

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