Happy Lottery Winners and Lottery‐Ticket Bias

• Published date: 01 June 2021
• Author: Seonghoon Kim,Andrew J. Oswald
• Date: 01 June 2021
• DOI: http://doi.org/10.1111/roiw.12469

© 2020 The Authors. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of

International Association for Research in Income and Wealth

317

HAPPY LOTTERY WINNERS AND LOTTERY-TICKET BIAS

by Seonghoon Kim

Singapore Management University

AND

Andrew J. oSwAld*

University of Warwick

The world spends a remarkable $250 billion a year on lottery tickets. Yet, perplexingly, it has proved dif-

ficult for social scientists to show that lottery windfalls actually make people happier. This is the famous

and still unresolved paradox due initially to Brickman and colleagues. Here we describe an underlying

weakness that has affected the research area, and explain the concept of lottery-ticket bias (LT bias),

which stems from unobservable lottery spending. We then collect new data—in the world’s most intense

lottery-playing nation, Singapore—on the amount that people spend on lottery tickets (n=5626). We

demonstrate that, once we correct for LT bias, a lottery windfall is predictive of a substantial improve-

ment in happiness and well-being.

JEL Codes: A12, I31

Keywords: happiness, income, well-being, GHQ, mental-health, lottery

“Lottery winners … were not significantly.

different … in how happy they… were.”

Brickman et al., 1978.

A large modern literature examines the economics of human happiness and

argues—consistent with intuition—that richer people tend to be happier and that

poverty is a social “bad.” Recent work includes the review by Clark (2018), and

articles such as Clark, Fleche and Senik (2016), De Neve et al. (2018), Brodeur and

Fleche (2019), Welsch and Biermann (2019), and Budria and Ferrer-I-Carbonell

(2019). Yet, as pointed out by Clark (2018), an important problem is that income is

not exogenous. That makes causal inference difficult.

Notes: The first draft of this paper was written in 2017. We thank many international colleagues,

and especially 2 referees and Peter Kuhn and Erik Lindqvist, for helpful comments. The current paper

is on the same topic as continuing research by Rainer Winkelmann on German panel data. The current

paper uses data from the Singapore Life Panel(SLP) conducted by the Centre for Research on the

Economics of Ageing (CREA) at Singapore Management University. The SLP data collection was fi-

nancially supported by the Singapore Ministry of Education (MOE) Academic Research Fund Tier 3

grant MOE2013-T3-1-009. We also thank the CAGE centre at Warwick University for support, and

Susann Rohwedder for comments on the design of lottery questions.

*Correspondence to: Andrew J. Oswald, University of Warwick, Coventry CV4 7AL, United

Kingdom (andrew.oswald@warwick.ac.uk).

Review of Income and Wealth

Series 67, Number 2, June 2021

DOI: 10.1111/roiw.12469

This is an open access article under the terms of the Creat ive Commo ns Attri bution License, which

permits use, distribution and reproduction in any medium, provided the original work is properly

cited.

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Review of Income and Wealth, Series 67, Number 2, June 2021

318

© 2020 The Authors. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of

International Association for Research in Income and Wealth

For this reason, researchers in a number of fields have tried to study lottery

windfalls. That has produced a famous and largely unsolved paradox. A widely-

cited 1978 paper by Brickman, Coates, and Janoff-Bulman concluded that winning

the lottery does not affect people’s subjective well-being. It seems rather likely that

normal human beings would take a different view, and would look askance at any

behavioral scientist who quoted to them the Brickman idea. The organizations

within the World Lottery Association (WLA), for example, have combined revenue

of over 250 billion US dollars. In some European countries, half of adult citizens

regularly buy tickets. The majority of US states operate lotteries with large prizes

(WLA, 2017). It is also known that humans are reluctant to give up lottery tickets

for cash (Risen and Gilovich, 2007).

Our study points to a methodological difficulty with almost all lottery anal-

yses and it describes a potential solution. We collect new data on the nation of

Singapore. This country has the largest purchases of lottery tickets per-person in

the world (WLA, 2017). We then show how to reach the opposite conclusion from

the ideas begun by Brickman and his colleagues. Lottery wins do improve happi-

ness and life satisfaction.

The background is familiar to many kinds of social scientists. Money seems

to matter to human beings. Although it depends how one spends it (Dunn et al.,

2008; Dunn et al., 2011; Whillans et al., 2017), asymmetries seem to exist (Boyce

et al., 2013; De Neve et al., 2018), and people may be subject to significant affective-

forecasting errors about how happy they will feel after events (Dunn, Wilson, and

Gilbert, 2003), there is now a great deal of correlational evidence that richer peo-

ple tend to be happier than poorer people (including earlier work such as Diener

and Biswas-Diener 2002; Blanchflower and Oswald, 2004; Boyce et al., 2010). This

happiness-income correlation has been found in cross-sectional and longitudinal

data. Recent research suggests that it may continue to hold even at extreme levels

of wealth (Donnelly et al., 2018), although it is possible that there is also some

form of reverse link running from well-being to later levels of income (De Neve

and Oswald, 2012).

When it comes to money that is received in a lottery win, however, the pattern

is not so clear (Brickman et al., 1978). Nearly half a century ago, these authors

conducted what is generally seen as the first formal attempt to use lottery data to

test whether a windfall of money induces greater happiness. In a much-cited paper

in social psychology (approx. 3000 citations in Google Scholar), their article docu-

mented an indifferent-winner puzzle.

It is certainly possible to raise objections to the Brickman et al. method,

which is crude when viewed alongside today’s methods. The authors’ article used

cross-sectional data on only 22 lottery winners and compared them to 22 con-

trol individuals. Moreover, among the winners, a higher percentage (32 percent of

them) had no educational qualifications (compared to 18 percent of the controls).

The authors of the study did not do regression analysis to adjust for such differ-

ences. Hence, the authors’ 1978 paper would not have been easy to publish in the

current era of scientific research. The difficulty for quantitative social science is

that modern inquiries have not produced clear evidence against Brickman’s para-

doxical result (for example, Nissle and Bschor, 2002; Kuhn et al., 2011), although,

in passing, it should be noted that Brickman et al. viewed their own result as logical