The Powerball Regressivity: An Evidence from the World's Largest Lottery Prize
Keywords:Powerball, regressivity, rollover, income elasticity, jackpot
AbstractOn 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.
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