TY  - JOUR
AU  - Kuhn,Peter J.
AU  - Kooreman,Peter
AU  - Soetevent,Adriaan R.
AU  - Kapteyn,Arie
TI  - The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14035
PY  - 2008
Y2  - May 2008
UR  - http://www.nber.org/papers/w14035
L1  - http://www.nber.org/papers/w14035.pdf
N1  - Author contact info:
Peter J. Kuhn
Department of Economics
University of California, Santa Barbara
2127 North Hall
Santa Barbara, CA  93106
Tel: 805/893-3666
Fax: 805/893-8830
E-Mail: pjkuhn@econ.ucsb.edu

Peter Kooreman
Tilburg University
Room K 411
PO Box 90153
5000 LE Tilburg
The Netherlands
E-Mail: p.kooreman@uvt.nl

Adriaan Soetevent
Universiteit van Amsterdam
Faculty of Economics and Business
Roetersstraat 11
1018 WB Amsterdam
The Netherlands
E-Mail: a.r.soetevent@uva.nl

Arie Kapteyn
RAND Corporation
1776 Main Street
P.O. Box 2138
Santa Monica, CA  90407-2138
Tel: (310) 393-0411 x 7973
E-Mail: arie_kapteyn@rand.org
AB  - In the Dutch Postcode Lottery a postal code (19 households on average) is randomly selected weekly, and prizes - consisting of cash and a new BMW - are awarded to lottery participants living in that postal code.  On average, this generates a temporary, unexpected income shock equal to about eight months of income for about one third of the households in a typical winning code, while leaving the incomes of nonwinning, neighboring households unaffected.  We study the responses of consumption and reported happiness of both winners and nonwinners  to these shocks.  Consistent with simple models of in-kind transfers, the overwhelming majority of households who won a BMW convert it into cash.  With the exception of food away from home, the only 'own' effects of cash winnings we detect are on durables expenditures and car consumption; these results support a version of the permanent income hypothesis in which durable spending is used to smooth consumption.  We detect social effects of neighbors' winnings on two types of consumption:  cars and exterior home renovations.  Six months after the fact, winning the lottery does not make households happier, nor do neighbors' winnings reduce happiness.
ER  -