Abstract:

The regressivity of lotteries has become an increasingly important issue in the U.S. as the number of state–run lotteries has increased. Despite this, we still know relatively little about the nature of lottery regressivity. I use a new dataset on Powerball lotto sales to analyze how regressivity varies with jackpot size within a single lotto game. I find that this large–stakes game is significantly less regressive at higher jackpot sizes. Out–of–sample extrapolation of this result suggests the possibility of progressivity at jackpots substantially higher than those currently experienced. This may indicate that concerns about regressivity might be allayed by concentrating lotto games to produce higher average jackpots.

Citation

Oster, Emily (2004), Are All Lotteries Regressive? Evidence From the Powerball, National Tax Journal, 57:2, pp. 179-87

DOI: dx.doi.org/10.17310/ntj.2004.2.02