DP17173 The Sentimental Propagation of Lottery Winnings: Evidence from the Spanish Christmas Lottery

Author(s): Morteza Ghomi, Isabel Mico-Millan, Evi Pappa
Publication Date: April 2022
Keyword(s): Randomized natural experiment, sentiment and consumption responses, Transitory Income Shocks
JEL(s): D12, E21, E32, E62
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17173

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.