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Working Paper 2007-042B

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"Inter-temporal Differences in the Income Elasticity of Demand for Lottery Tickets"
by Thomas A. Garrett, and Cletus C. Coughlin

We estimate annual income elasticities of demand for lottery tickets using seventeen or more years of county-level data for three states. We find that the income elasticity of demand (and thus the tax burden) for lottery tickets has changed over time. We argue that these changes are due to changes in a state’s lottery game portfolio and the growth in consumer income. Trends in the income elasticity for instant and online lottery games appear to be different. Our results question the long-term growth potential of lottery revenue and have policy implications for state governments and those concerned about regressivity.

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Category > Applied Microeconomics
Author > Thomas A. Garrett
Author > Cletus C. Coughlin