Working Paper: CEPR ID: DP17173
Authors: Morteza Ghomi; Isabel Micomillan; Evi Pappa
Abstract: We leverage a unique natural experiment, the Spanish Christmas lottery, to investigate the impact of highly geographically clustered winnings on macroeconomic aggregates, and on sentiment and durable consumption, using survey evidence. Lottery winnings induce significant demand effects, especially during recessions, reducing unemployment and increasing job creation and CPI prices. Albeit not receiving wins, households in winning provinces become more optimistic on impact and significantly increase their durable consumption (for furniture and vehicles) six months after the shock. We propose this lottery as an unconventional fiscal policy tool for increasing aggregate revenues and stimulating local demand without crowding out aggregate activity.
Keywords: Randomized natural experiment; Transitory income shocks; Sentiment; Consumption responses
JEL Codes: D12; E21; E32; E62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lottery Winnings (H27) | Unemployment Rate (J64) |
| Lottery Winnings (H27) | Job Creation (J23) |
| Lottery Winnings (H27) | CPI Prices (E31) |
| Lottery Winnings (H27) | Sentiment (G41) |
| Sentiment (G41) | Durable Consumption (E21) |
| Lottery Winnings (H27) | Durable Consumption (E21) |
| Lottery Winnings (H27) | Local Demand (R22) |