Winning Big But Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health

42 Pages Posted: 8 Feb 2010

See all articles by Bénédicte Apouey

Bénédicte Apouey

CNRS; Paris School of Economics (PSE)

Andrew Clark

Paris School of Economics (PSE); IZA Institute of Labor Economics

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Abstract

We use British panel data to determine the exogenous impact of income on a number of individual health outcomes: general health status, mental health, physical health problems, and health behaviors (drinking and smoking). Lottery winnings allow us to make causal statements regarding the effect of income on health, as the amount won by winners is largely exogenous. Positive income shocks have no significant effect on general health, but a large positive effect on mental health. This result seems paradoxical on two levels. First, there is a well-known status gradient in health in cross-section data, and, second, general health should partly reflect mental health, so that we may expect both variables to move in the same direction. We propose a solution to the first apparent paradox by underlining the endogeneity of income. For the second, we show that lottery winnings are also associated with more smoking and social drinking. General health will reflect both mental health and the effect of these behaviors, and so may not improve following a positive income shock. This paper thus presents the first microeconomic analogue of previous work which has highlighted the negative health consequences of good macroeconomic conditions.

Keywords: income, self-assessed health, mental health, smoking, drinking

JEL Classification: D1, I1, I3

Suggested Citation

Apouey, Bénédicte and Clark, Andrew Eric, Winning Big But Feeling No Better? The Effect of Lottery Prizes on Physical and Mental Health. IZA Discussion Paper No. 4730, Available at SSRN: https://ssrn.com/abstract=1549206 or http://dx.doi.org/10.2139/ssrn.1549206

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Andrew Eric Clark

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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