The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery

Kuhn, Peter; Kooreman, Peter; Soetevent, Adriaan R.; Kapteyn, Arie

The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery

33 Pages Posted: 29 Jun 2010

Peter Kuhn

University of California, Santa Barbara - Department of Economics; IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Peter Kooreman

Tilburg University - Center and Faculty of Economics and Business Administration; IZA Institute of Labor Economics

Adriaan R. Soetevent

University of Groningen; Tinbergen Institute

Arie Kapteyn

Dornsife Center for Economic and Social Research - University of Southern California; IZA Institute of Labor Economics

Date Written: May 2010

Abstract

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

Kuhn, Peter and Kooreman, Peter and Soetevent, Adriaan R. and Kapteyn, Arie, The Effects of Lottery Prizes on Winners and Their Neighbors: Evidence from the Dutch Postcode Lottery (May 2010). IZA Discussion Paper No. 4950. Available at SSRN: https://ssrn.com/abstract=1631085