The Powerball Regressivity: An Evidence from the World's Largest Lottery Prize

Authors

  • Sukhun Lee Loyola University Chicago
  • Ki Han Suffolk University
  • David Suk Rider University
  • Hyunmo Sung Handong Global University

DOI:

https://doi.org/10.5750/jgbe.v12i1.1489

Keywords:

Powerball, regressivity, rollover, income elasticity, jackpot

Abstract

On January 13, 2016, the largest jackpot prize in world history took place.  In this paper, we examied the Powerball's regressivity from the 16th drawing with a jackpot prize of $301.8 million to the 20th drawing with a jackpot prize of $1.5 billion.  These last five drawings allowed us to examine whether the regressivity continues to decline and turns progressive as jackpot levels approach the billion-dollar mark.  Our sample include Powerball sales from 44 states and the District of Columbia.  Since the cost of living varied across states/jurisdictions, we used real lottery and income data to estimate income elasticity.  For the 16th through 18th drawings, there is a positive relationship between jackpot level and income elasticity.  However, on the 19th drawing with a jackpot of $949.8 million, the income elasticity declined to 0.554 from 0.900.  On the 20th drawing, the income elasticity increased to 0.649 but remained below 0.900 reached on the 18th drawing.

References

Clotfelter, C. & Cook, P., 1987. “Implicit Taxation in Lottery Finance.” National Tax Journal, 40, 4, 533-46.

Garrett, T. & Coughlin, C., 2009. “Inter-temporal Differences in the Income Elasticity of Demand for Lottery Tickets.” National Tax Journal, 62, 1, 77-99.

Garrett, T. & Kolesnikova, N., 2015, “Local Price Variation and the Income Elasticity of Demand for Lottery Tickets.” Public Finance Review, 43, 6, 717-738.

Ghent, L. & Grant, A., 2010. “The Demand for Lottery Products and their Distributional Consequences.” National Tax Journal, 63, 2, 253-268.

Han, C., Lee, S., Suk, D. & Sung, H., 2017. “Jackpot Rollover and Lottery Regressivity.” The Journal of Gambling Business and Economics, 11, 1, 7-26.

Jackson, R., 1994. “Demand for Lottery Products in Massachusetts.” The Journal of Consumer Affairs 28 (2), (Winter), 313-325.

Oster, E., 2004. “Are All Lotteries Regressive? Evidence from the Powerball.” National Tax Journal, 57, 2, 179-87.

Real Personal Income for States and Metropolitan Areas, 2015; www.bea.gov

www.LottoReport.com

Published

2019-10-11

Issue

Section

Articles