State Lotteries and Agency Costs

Richard B. Whitaker

American Journal of Economics and Sociology, 2007, vol. 66, issue 3, pages 533-544

Abstract: Some nonparticipants support lotteries because they expect the lottery will shift a portion of their tax burden to participants. The principal-agent model suggests that lotteries will result in an above normal increase in state expenditures. This paper finds that 77 percent of net lottery proceeds are utilized for above normal spending increases, suggesting that tax benefits to nonparticipants are greatly diminished. Copyright 2007 American Journal of Economics and Sociology, Inc..

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