The Leviathan Lottery? Testing the Revenue Maximization Objective of State Lotteries as Evidence for Leviathan

Thomas Garrett

Public Choice, 2001, vol. 109, issue 1-2, 17 pages

Abstract: Unlike other governmental units, state lottery agencies publicly acknowledge that their primary objective is revenue maximization. This claim and the inherent monopoly power of lottery agencies provides a unique arena to test for Leviathan. With data obtained from United States lottery games, I perform a Laffer curve analysis to derive the optimal lottery tax rates for different categories of games. These optimal tax rates and Monte Carlo simulations are then used to test whether the current tax structure of lottery games is indeed the revenue maximizing structure. I find strong empirical evidence for the "Leviathan Lottery". Copyright 2001 by Kluwer Academic Publishers

Date: 2001
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