Are All Lotteries Regressive? Evidence from the Powerball

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 these large-stakes games are significantly less regressive at higher jackpot sizes. The results suggest that the lottery becomes progressive at a jackpot around $806 million. This suggests that concerns about regressivity might be allayed (although given that jackpots are generally much lower than $800 million, not entirely eliminated) by concentrating lotto games to produce higher average jackpots. ∗I am very grateful to the Connecticut State Lottery for providing the data. David Laibson, Markus Mobius, Al Roth and Jesse Shapiro provided helpful discussion and comments. Contact Information: [email protected]