Research from Assistant Professor of Law Paige Marta Skiba found that mid-level lottery winners did not pay off their debt or increase equity in new or existing assets.
And though these mid-level lottery winners were less likely than small winners (those who won less than $10,000) to file for bankruptcy immediately after winning, they were 50 percent more likely to file for bankruptcy three to five years after winning their prize.
“Winning the lottery seemed to do little to help lottery winners ease their debt,” said Skiba. “Our results are consistent with some winners using their prize to take additional risks or buy expensive luxury goods. Others seemed to simply lack the knowledge to handle large amounts of money wisely.”
Skiba and her co-authors, Scott Hankins of the University of Kentucky and Mark Hoekstra of the University of Pittsburgh, also looked at this research in light of the possibility that lawmakers may consider giving people large sums of money to ease their financial burdens. The researchers found that receiving sufficiently large cash transfers to pay off all of one’s unsecured debt only enabled individuals to postpone, rather than prevent, bankruptcy.
“While we cannot be sure that homeowners or other beneficiaries of government aid would respond in the same way lottery winners did, the results may warrant some skepticism about the long-term efficacy of bailouts,” said Skiba.
The researchers used data from Florida’s Fantasy 5 lottery game from April 1993 through November 2002. They examined all winners who won more than $600. If someone won the lottery more than once, the researchers only looked at the person’s first win. This added up to almost 35,000 individuals. In all, almost 2,000 Fantasy 5 winners were linked to a bankruptcy in the five years after winning.
Skiba said that the act of filing for bankruptcy is important for several reasons. “Filing for bankruptcy is arguably the most extreme signal of financial distress,” said Skiba. “Not only is it bad for creditors, but it also seriously harms a filer’s credit score, impacting the availability and price of future loans.”
The researchers added that lottery players are much more representative of the population than some might think. Earlier research conducted in 2005 showed that more than half of American adults had played the lottery in the past year.
A draft of the working paper titled, “The Ticket to Easy Street? The Financial Consequences of Winning the Lottery,” can be found by clicking the title or at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1324845. Skiba and her co-authors will be presenting their research at the National Bureau of Economic Research Law and Economics Summer Institute at the end of July.
Amy Wolf | Newswise Science News
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
In recent years, lasers with ultrashort pulses (USP) down to the femtosecond range have become established on an industrial scale. They could advance some applications with the much-lauded “cold ablation” – if that meant they would then achieve more throughput. A new generation of process engineering that will address this issue in particular will be discussed at the “4th UKP Workshop – Ultrafast Laser Technology” in April 2017.
Even back in the 1990s, scientists were comparing materials processing with nanosecond, picosecond and femtosesecond pulses. The result was surprising:...
Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...
A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.
Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...
In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.
“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...
The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.
The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...
16.11.2016 | Event News
01.11.2016 | Event News
14.10.2016 | Event News
07.12.2016 | Health and Medicine
07.12.2016 | Life Sciences
07.12.2016 | Health and Medicine