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Our most academic publication offers research and surveys on monetary policy, national and international developments, banking, and more. The content is written for an economically informed readership—from the undergraduate student to the PhD.

Vol. 88, No. 3 (Posted 2006-05-01)

The Geography, Economics, and Politics of Lottery Adoption

by Cletus C. Coughlin, Thomas A. Garrett, and Rubén Hernández-Murillo

Since New Hampshire introduced the first modern state-sponsored lottery in 1964, forty-one other states plus the District of Columbia have adopted lotteries. Lottery ticket sales in the United States topped billion in 2004, with state governments reaping nearly billion in net lottery revenue. In this paper the authors attempt to answer the question of why some states have adopted lotteries and others have not. First they establish a framework for analyzing the determination of public policies that highlights the roles of individual voters, interest groups, and politicians within a state as well as the influence of policies in neighboring states. The authors then introduce some general explanations for the adoption of a new tax that stress the role of economic development, fiscal health, election cycles, political parties, and geography. Next, because the lottery adoption decision is more than simply a tax decision, a number of factors specific to this decision are identified. State income, lottery adoption by neighboring states, the timing of elections, and the role of organized interest groups, especially the opposition of certain religious organizations, are significant factors explaining lottery adoption.

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