THE (AGGREGATE) DEMAND FOR STATE-LOTTERY TICKETS: WHAT HAVE WE REALLY LEARNED?

Thomas A. Garrett

Contemporary Economic Policy, 2016, vol. 34, issue 3, 475-482

Abstract: type="main" xml:id="coep12155-abs-0001"> Lottery-demand models using aggregate data are often used to make inferences regarding individual behavior, the most important being the distributional burden of lottery-ticket expenditures. It is shown here that estimates for the income elasticity and the cross-price elasticity will only be representative of individual behavior under extremely restrictive assumptions. In fact, estimation of aggregate-demand models presupposes that the income elasticity is equal to one. Cross-sectional analyses using microlevel data face similar restrictions on consumer behavior. Remedies are discussed, but more conclusive evidence on the distributional burden of lotteries will remain elusive until better individual-level data become available. (JEL D11, H71, H22)

Date: 2016
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