Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax

Frank Scott; John Garen

doi:10.1016/0047-2727(94)90073-6

Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax

Frank Scott, John Garen

Economics

Research output: Contribution to journal › Article › peer-review

95 Scopus citations

Abstract

When consumers' indifference curves are discontinuous at zero, perhaps due to stigma or fixed costs of purchase, then factors influencing the amount purchased will have a different effect on the probability of purchase. Estimation of the demand for a commodity like lottery tickets requires a procedure that accounts for this. Tobit estimation, commonly used in this literature, does not allow for this generalization. We investigate individual lottery ticket purchases using data from a survey of households. Our results are quite disparate from earlier studies regarding the effects of many demographic variables on probability of play, level of play, and expected lottery ticket purchases, and imply a different demographic incidence of the lottery tax than previous studies suggest.

Original language	English
Pages (from-to)	121-143
Number of pages	23
Journal	Journal of Public Economics
Volume	54
Issue number	1
DOIs	https://doi.org/10.1016/0047-2727(94)90073-6
State	Published - May 1994

Bibliographical note

Funding Information:
KY 40506, USA. *We wish to thank participants in a workshop at the University of Chicago and in the Applied Microeconomics Workshop at the University of Kentucky for comments. Also, discussions with Dan Black and Weiren Wang were very fruitful. Financial support was provided by the National Science Foundation (grant no. RII-8610671) and the Commonwealth of Kentucky through the EPSCoR program. ‘Clotfelter and Cook (1989, pp. 223-227) summarize economic studies of the incidence of the lottery tax. They conclude that, since expenditures seem to be flat across income classes, the lottery tax is decidedly regressive. ‘Recent analysis of aggregate sales include Stover (1987), who estimates potential revenues that states can expect from different types of lottery games, and Hersch and McDougall (1989), who compare county-level lottery sales with voting patterns in lottery adoption elections. In addition to Clotfelter and Cook (1989, pp. 10&104), two other recent lottery studies using individual data to analyze demographic aspects of the tax incidence are Livernois (1987) and Borg and Mason (1988).

ASJC Scopus subject areas

Finance
Economics and Econometrics

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title = "Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax",

abstract = "When consumers' indifference curves are discontinuous at zero, perhaps due to stigma or fixed costs of purchase, then factors influencing the amount purchased will have a different effect on the probability of purchase. Estimation of the demand for a commodity like lottery tickets requires a procedure that accounts for this. Tobit estimation, commonly used in this literature, does not allow for this generalization. We investigate individual lottery ticket purchases using data from a survey of households. Our results are quite disparate from earlier studies regarding the effects of many demographic variables on probability of play, level of play, and expected lottery ticket purchases, and imply a different demographic incidence of the lottery tax than previous studies suggest.",

author = "Frank Scott and John Garen",

note = "Funding Information: KY 40506, USA. *We wish to thank participants in a workshop at the University of Chicago and in the Applied Microeconomics Workshop at the University of Kentucky for comments. Also, discussions with Dan Black and Weiren Wang were very fruitful. Financial support was provided by the National Science Foundation (grant no. RII-8610671) and the Commonwealth of Kentucky through the EPSCoR program. {\textquoteleft}Clotfelter and Cook (1989, pp. 223-227) summarize economic studies of the incidence of the lottery tax. They conclude that, since expenditures seem to be flat across income classes, the lottery tax is decidedly regressive. {\textquoteleft}Recent analysis of aggregate sales include Stover (1987), who estimates potential revenues that states can expect from different types of lottery games, and Hersch and McDougall (1989), who compare county-level lottery sales with voting patterns in lottery adoption elections. In addition to Clotfelter and Cook (1989, pp. 10&104), two other recent lottery studies using individual data to analyze demographic aspects of the tax incidence are Livernois (1987) and Borg and Mason (1988).",

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Probability of purchase, amount of purchase, and the demographic incidence of the lottery tax

Abstract

Bibliographical note

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