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.
|Journal||American Economic Review|
|Publication status||Published - 2011|
Kuhn, P., Kooreman, P., Soetevent, A., & Kapteyn, A. (2011). The effects of lottery prizes on winners and their neighbours: Evidence from the Dutch Postcode Lottery. American Economic Review, 101(5), 2226-2247. http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.5.2226