Are All Lotteries Regressive? Evidence from the Powerball
16 Pages Posted: 27 Mar 2004
Date Written: January 5, 2004
The regressivity of lotteries has become an increasingly important issue in the U.S. as the number of state-run lotteries has increased. Despite this, we still know relatively little about the nature of lottery regressivity. I use a new dataset on Powerball lotto sales to analyze how regressivity varies with jackpot size within a single lotto game. I find that these large-stakes games are significantly less regressive at higher jackpot sizes. An out-of-sample extrapolation of these results suggest that the lottery becomes progressive at a jackpot around $806 million. This suggests that concerns about regressivity might be allayed by concentrating lotto games to produce higher average jackpots.
Keywords: gambling, lottery, tax, regressivity
JEL Classification: D31, D81, H22, H31
Suggested Citation: Suggested Citation
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