HOW SINGAPOREANS HANDLE UNEXPECTED INCOME CHANGES FROM LOTTERY WINNINGS
With insights from: Consumption responses to income shocks through lottery winning Seonghoon Kim, Associate Professor of Economics Singapore Management University
Lottery wins are a rare and natural experiment about how people spend money won in an unforeseen manner, and economists study them to see how people genuinely respond to sudden windfalls.
On average, Singapore senior lottery players aged 50 to 70 spend a little over
on lottery tickets each year.
About half of them reported winning over a one-year period. About half of these lottery winners spend about half of their winnings within the first year.
Associate Professor Seonghoon Kim’s research shows a broad range of prize amounts.
The median prize value was S$250
2.3%
0.1%
15.9%
50%
84.1%
97.7%
99%
indicating that most prizes were on the lower side of overall possible winnings.
but the 5th percentile prize size was just S$10 within the Singapore Life Panel data,
$100
$100
$10
$50
$10
$50
$50
Assoc Prof Kim found that these lottery winners tend to spend an extra S$0.504for every S$1 won within 12 months of lottery wins.
$100
With that said, there are also other factors that influence lottery winners’ consumption habits.
$10
$100
$50
Singaporean lottery winners tend to spend on everyday goods rather than on luxury items such as cars or jewellery.
Households with limited access to cash or credit tend to spend more than twice their winnings.
From a policymaking perspective, governments can use this data to design effective public policies to develop and maximise social welfare. Some examples being:
Such measures are most effective when targeted towards liquidity-constrained households.
Giving money directly to people or using fiscal stimulus measures can greatly increase how much people spend. When the economy is doing poorly, governments may consider these methods to boost demand.
Since liquidity constraints affect consumption behaviour, it might be good to consider formulating policies that focus on specific groups.
The research suggests implementing public transfer programmes, where the government provides financial support to individuals without requiring anything in return, to offer income support to households, which may lead to increased spending on goods and services.
REFERENCES
KIM, Seonghoon and KOH, Kanghyock. Consumption responses to income shocks through lottery winning. (2024). Oxford Bulletin of Economics and Statistics. 1-25. Available at: https://ink.library.smu.edu.sg/soe_research/2725
This study uses data from the Singapore Life Panel, a survey covering over 6,200 Singaporeans aged 50 to 70. It is maintained by SMU Centre for Research on Successful Ageing (ROSA).
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Transcript
HOW SINGAPOREANS HANDLE UNEXPECTED INCOME CHANGES FROM LOTTERY WINNINGS
With insights from: Consumption responses to income shocks through lottery winning Seonghoon Kim, Associate Professor of Economics Singapore Management University
Lottery wins are a rare and natural experiment about how people spend money won in an unforeseen manner, and economists study them to see how people genuinely respond to sudden windfalls.
On average, Singapore senior lottery players aged 50 to 70 spend a little over
on lottery tickets each year.
About half of them reported winning over a one-year period. About half of these lottery winners spend about half of their winnings within the first year.
Associate Professor Seonghoon Kim’s research shows a broad range of prize amounts.
The median prize value was S$250
2.3%
0.1%
15.9%
50%
84.1%
97.7%
99%
indicating that most prizes were on the lower side of overall possible winnings.
but the 5th percentile prize size was just S$10 within the Singapore Life Panel data,
$100
$100
$10
$50
$10
$50
$50
Assoc Prof Kim found that these lottery winners tend to spend an extra S$0.504for every S$1 won within 12 months of lottery wins.
$100
With that said, there are also other factors that influence lottery winners’ consumption habits.
$10
$100
$50
Singaporean lottery winners tend to spend on everyday goods rather than on luxury items such as cars or jewellery.
Households with limited access to cash or credit tend to spend more than twice their winnings.
From a policymaking perspective, governments can use this data to design effective public policies to develop and maximise social welfare. Some examples being:
Such measures are most effective when targeted towards liquidity-constrained households.
Giving money directly to people or using fiscal stimulus measures can greatly increase how much people spend. When the economy is doing poorly, governments may consider these methods to boost demand.
Since liquidity constraints affect consumption behaviour, it might be good to consider formulating policies that focus on specific groups.
The research suggests implementing public transfer programmes, where the government provides financial support to individuals without requiring anything in return, to offer income support to households, which may lead to increased spending on goods and services.
REFERENCES
KIM, Seonghoon and KOH, Kanghyock. Consumption responses to income shocks through lottery winning. (2024). Oxford Bulletin of Economics and Statistics. 1-25. Available at: https://ink.library.smu.edu.sg/soe_research/2725
This study uses data from the Singapore Life Panel, a survey covering over 6,200 Singaporeans aged 50 to 70. It is maintained by SMU Centre for Research on Successful Ageing (ROSA).