Economics serving society

Winning big but feeling no better? The effect of lottery prizes on physical and mental health

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Bénédicte H. Apouey and Andrew E. Clark

Generally, those with the highest incomes have the best self-reported health and longer life expectancy. But it is actually not that simple to understand the significance of this link between income and health. At first glance, this reflects the impact of income on health: for example, individuals with higher incomes have better access to quality healthcare, improving their health. However, the causality could easily be the other way around, with health affecting income: for example, individuals in the best health work more and as a consequence receive higher incomes. The third possibility is that the link is a statistical artefact created by the omission of factors tha are correlated with both health and income (such as personality traits, or birth weight). These different interpretations are not mutually exclusive. Knowing whether income influences health is an important question from the point of view of public policy: if such an effect exists, then income redistribution would increase the well-being of poorer individuals both directly and indirectly, via improved health.

In this article, in order to measure the effect of income on health, Bénédicte H. Apouey and Andrew E. Clark analyse how the health of individuals changes when they experience an unanticipated income shock : to do so, they use lottery wins, which cannot be predicted. They consider a wide range of health variables including the state of general health, but also mental health and life-styles (alcohol consumption and smoking). The authors also take into account the individual characteristics that are unobserved and stable over time, such as risk aversion. The analysis uses data from the British Household Panel Survey from 1996 to 2008. These data are longitudinal and contain over 11,000 observations on lottery winners. The authors show that the larger lottery wins are not associated with a better individual health. On the contrary, the analysis of the specific health variables suggests that the wins generate a significant gain in psychological well-being but worse health behaviours, with an increase in smoking and social drinking. Finally, the absence of an effect of lottery wins on general health can perhaps be understood as the sum of the two effects on mental and physical health, which pull in different directions and thus cancel each other out. Health is not then a holistic concept and here it is found that the different components of health change in different directions.

Original title of the article: “Winning big but feeling no better? The effect of lottery prizes on physical and mental health”
Published in: Health Economics, Volume 24, Issue 5, pages 516–538, 2015.
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