The Impact of Education Earmarking on State-Level Lottery Sales

Prior research argues that lottery consumers consider how funds are to be used in making lottery purchase decisions. Possible explanations for this behavior include altruism as well as the desire of low-income families to provide educational opportunities within their community. This paper uses a panel of lottery sales for U.S. states covering the period 1980-2000 to test hypotheses regarding the impact of educational earmarking on lottery purchases. Our estimates suggest that states earmarking all or part of their revenue to education experience an increase in lottery sales between 11% and 25 %, depending on the specification of state trends. Whether the propensity for earmarking to increase sales is viewed positively or negatively depends largely on one's ethical and moral views of lotteries.