Academic journal article Monthly Labor Review

Placing a Value on Playing the Lottery

Academic journal article Monthly Labor Review

Placing a Value on Playing the Lottery

Article excerpt

If you play the lottery, would you report 100 percent of your expenditures when surveyed? Have you ever thought how your gaming affects the national economy? Indeed, how do governments value the output of a lottery when estimating the gross domestic product (GDP)?

Economist Kam Yu uses an economics approach to study the Canadian lottery in "Measuring the Output and Prices of the Lottery Sector: An Application of Implicit Expected Utility Theory," a chapter in Price Index Concepts and Measurement, W. Erwin Diewert, John S. Greenless, and Charles R. Hulten, editors (University of Chicago Press: National Bureau of Economic Research, December 2009, http://www.nber.org/ chapters/c5086.pdf).

Yu contends that the lottery is an important component of GDP and so an accurate way to measure the real output of the lottery is needed. The amount spent on the lottery is consistently underreported by households. Data from the Survey of Household Spending (SHS) show that 68.4 percent of families in Canada participate in lottery purchases, with an average expenditure per household of $238. However, lottery revenue reported by the government was 3 times more than the SHS figure. Yu proposes a direct utility approach to measure the value of government services related to lotteries. …

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