The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery
33 Pages Posted: 29 Jun 2010
Date Written: May 2010
Each week, the Dutch Postcode Lottery (PCL) randomly selects a postal code, and distributes cash and a new BMW to lottery participants in that code. We study the effects of these shocks on lottery winners and their neighbors. Consistent with the life-cycle hypothesis, the effects on winners' consumption are largely confined to cars and other durables. Consistent with the theory of in-kind transfers, the vast majority of BMW winners liquidate their BMWs. We do, however, detect substantial social effects of lottery winnings: PCL nonparticipants who live next door to winners have significantly higher levels of car consumption than other nonparticipants.
Keywords: social interactions, natural experiments
JEL Classification: D12, C21
Suggested Citation: Suggested Citation