Oswald and Winkelmann (2019) on Lottery Wins and Happiness

Andrew J. Oswald and Rainer Winkelmann, “Lottery Wins and Satisfaction: Overturning Brickman in Modern Longitudinal Data on Germany.” In: Rojas M. (ed.) The Economics of Happiness. Springer, Cham., 2019.

• The "Brickman" in the title refers to an influential 1978 article that first questioned the Easterlin claim that, in cross-section data, higher income leads to greater happiness, and in part used the happiness of lottery winners as evidence. Brickman et al. found almost no improvement in happiness for lottery winners. [The article is Brickman, P., Coates, D., & Janoff-Bulman, R. (1978). Lottery winners and accident victims: Is happiness relative? Journal of Personality and Social Psychology, 36(8), 917–927.]

• The (usual) positive relationship that exists between income and happiness might not be causal. That is, more money might not mean more happiness -- it could be the other way around, that happier people earn more, or there could be some other factor that drives both happiness and income.

• Lottery winners to the rescue! The income windfall of lottery winners has a suggestion of exogeneity, it does not arise from unobserved personal traits.  

• The "rescue" provided by examining lottery winners might be limited, in part by the small numbers of such winners, and in part because lottery players might share relevant characteristics that are not possessed to the same degree by the rest of the population. This latter issue can be addressed by comparing only lottery winners, looking to see if winners who win more money are happier than those who win less money.  

• Another problem in terms of generalizing claims about money and subjective wellbeing (SWB) is that it is possible that the source of income, and not just the amount, matters for SWB.

• Lottery winning doesn’t seem to do much for health or for children’s health – perhaps because winners engage more intensely in risky activities like drinking alcohol. Mental health problems and mortality might increase for lottery winners.

• If your neighbor wins the lottery, you are more likely to buy a new car and engage in home renovation -- that is, you make significant expenditures on publicly visible goods. 

• Regular lottery players (in Germany) are drawn disproportionately from the less educated segments of society.

• A (biggish?) lottery win boosts satisfaction with your income, like would occur with a 20% increase in income – but the effect fades within a couple of years. A similar tale, with smaller magnitudes, applies to overall life satisfaction.