Publication Type
Journal Article
Version
publishedVersion
Publication Date
11-2022
Abstract
We study the effects of lottery winning on consumption spending using newly available household survey data in Singapore. We find strong consumption responses to a transitory income shock via lottery wins. Lottery winners spend about half of their prizes within 12 months of winning. We show that consumption responses are stronger among households with more binding liquidity constraints and less risk aversion, which is consistent with the standard life-cycle model. The strong consumption response suggests that fiscal stimulus policies or other public transfer programs could be an effective means of boosting consumption spending of the economy in the short run.
Keywords
Lottery, Consumption, Marginal propensity to consume, Liquidity constraint, Risk preference
Discipline
Health Economics
Research Areas
Econometrics
Publication
Oxford Bulletin of Economics and Statistics
ISSN
0305-9049
Identifier
10.2139/ssrn.4270029
Publisher
Wiley
Citation
KOH, Kanghyock and KIM, Seonghoon.
Consumption responses to income shocks through lottery winning. (2022). Oxford Bulletin of Economics and Statistics.
Available at: https://ink.library.smu.edu.sg/soe_research/2725
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.4270029