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Why you might go bankrupt if your next-door neighbor wins the lottery

Topic closed. 39 replies. Last post 10 months ago by KY Floyd.

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Arizona
United States
Member #165073
March 24, 2015
220 Posts
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Posted: February 17, 2016, 1:14 pm - IP Logged

This article is full of crap!

This type of garbage is designed to get people not to play the lottery.

Look at what they wrote: They analyzed lottery prizes and bankruptcy filings over 10 years, sorted down to six-digit postal codes that on average contained only 13 households, revealing financial ripple effects on a lottery winner's closest neighbors. They limited their analysis to neighborhoods with a single lottery win and excluded cases when lottery winners themselves filed for bankruptcy. They also omitted fixed-payout lottery prizes and very large jackpots.

The analysis only contained postal codes with 13 households? That's pretty small isn't it?

They limited the analysis to neighborhoods with a "single lottery win" that "omitted fixed-payout lottery prizes and very large jackpots". So if you don't have data from fixed payout lottery prizes (scratch offs) and very large jackpots (Mega Millions and Powerball), what is there left to analyze?

Also what is the reason for the bankruptcies? Job closures? Divorce?

The underlying cause of the bankruptcies is not cited nor are the amount of bankruptcies noted as abnormal.

The analysis only contained postal codes with 13 households? That's pretty small isn't it?

No, the analysis contained all Canadian neighborhoods, divided up by postal code. Each Canadian postal code, on average, contains about 13 households. The methodology was to compare bankruptcy rates in each winner's postal code (i.e. the winner's immediate neighbors) with the rates in nearby postal codes, where people's general economic status is about the same, but they aren't quite so physically close to the winner.

They limited the analysis to neighborhoods with a "single lottery win" that "omitted fixed-payout lottery prizes and very large jackpots". So if you don't have data from fixed payout lottery prizes (scratch offs) and very large jackpots (Mega Millions and Powerball), what is there left to analyze?

Provincial lottery winnings between $1,000 and $150,000.

Also what is the reason for the bankruptcies? Job closures? Divorce?

The underlying cause of the bankruptcies is not cited nor are the amount of bankruptcies noted as abnormal.

They looked at bankruptcies due to all causes, and found that living close to a lottery winner increased bankruptcy rates, with larger wins having a larger effect.

 

Most of your complaints are addressed in Section 4 of the paper.

    golfer1960's avatar - Lottery-003.jpg
    Eatontown, NJ
    United States
    Member #119670
    November 29, 2011
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    Posted: February 17, 2016, 3:01 pm - IP Logged

    This is just another hit piece on income inequality.

    "Income inequality induces poorer neighbors to consume more visible (rather than invisible) commodities to signal their abilities to 'keep up with the Joneses' to their richer neighbors," economists Sumit Agarwal, Vyacheslav Mikhed and Barry Scholnickwrote. "This tendency can lead to additional and unsustainable borrowing among the relatively poor to finance this additional conspicuous consumption, which can eventually result in financial distress and bankruptcy."

      golfer1960's avatar - Lottery-003.jpg
      Eatontown, NJ
      United States
      Member #119670
      November 29, 2011
      740 Posts
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      Posted: February 17, 2016, 3:04 pm - IP Logged

      The analysis only contained postal codes with 13 households? That's pretty small isn't it?

      No, the analysis contained all Canadian neighborhoods, divided up by postal code. Each Canadian postal code, on average, contains about 13 households. The methodology was to compare bankruptcy rates in each winner's postal code (i.e. the winner's immediate neighbors) with the rates in nearby postal codes, where people's general economic status is about the same, but they aren't quite so physically close to the winner.

      They limited the analysis to neighborhoods with a "single lottery win" that "omitted fixed-payout lottery prizes and very large jackpots". So if you don't have data from fixed payout lottery prizes (scratch offs) and very large jackpots (Mega Millions and Powerball), what is there left to analyze?

      Provincial lottery winnings between $1,000 and $150,000.

      Also what is the reason for the bankruptcies? Job closures? Divorce?

      The underlying cause of the bankruptcies is not cited nor are the amount of bankruptcies noted as abnormal.

      They looked at bankruptcies due to all causes, and found that living close to a lottery winner increased bankruptcy rates, with larger wins having a larger effect.

       

      Most of your complaints are addressed in Section 4 of the paper.

      This is just about income inequality and made to look like legit research:

      By demonstrating what the economists described as "causal evidence on the link between income inequality and financial distress," their paper adds to the growing use of data on lottery winners to examine the economic and social effects of sudden income windfalls.

        dallascowboyfan's avatar - tiana the-princess-and-the-frog.jpg
        Oklahoma
        United States
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        November 12, 2009
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        Posted: February 18, 2016, 12:04 pm - IP Logged

        Don't try to keep up with the Jones.....Crazy

        Success isn't in Having money...it's in Handling it

        I Agree! there was a movie with Demi Moore called The Joneses that touched on this.

        I Love Pink & Green 1908

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          LAKE HAVASU AZ
          United States
          Member #44729
          August 8, 2006
          446 Posts
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          Posted: February 19, 2016, 8:30 am - IP Logged

          I'd move another State, and tell no ONE...

          It works.... ;)

          some day....some day

            Teddi's avatar - Lottery-008.jpg

            United States
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            May 13, 2013
            1183 Posts
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            Posted: February 20, 2016, 6:47 am - IP Logged

            This article is full of crap!

            This type of garbage is designed to get people not to play the lottery.

            Look at what they wrote: They analyzed lottery prizes and bankruptcy filings over 10 years, sorted down to six-digit postal codes that on average contained only 13 households, revealing financial ripple effects on a lottery winner's closest neighbors. They limited their analysis to neighborhoods with a single lottery win and excluded cases when lottery winners themselves filed for bankruptcy. They also omitted fixed-payout lottery prizes and very large jackpots.

            The analysis only contained postal codes with 13 households? That's pretty small isn't it?

            They limited the analysis to neighborhoods with a "single lottery win" that "omitted fixed-payout lottery prizes and very large jackpots". So if you don't have data from fixed payout lottery prizes (scratch offs) and very large jackpots (Mega Millions and Powerball), what is there left to analyze?

            Also what is the reason for the bankruptcies? Job closures? Divorce?

            The underlying cause of the bankruptcies is not cited nor are the amount of bankruptcies noted as abnormal.

            You really need to take a Xanax and calm yourself down. There is nothing in this entire article anyone would need to get this worked up about. Common sense alone should tell you it isn't an anti -lottery hitjob. When has having a lottery win in a close vicinity ever decreased lottery sales? Instead people play more. They buy tickets at the same store as the winner. 

            If all the lottery winners who end up dead, end up bankrupt, end up behind bars, or end up hounded/sued for years doesn't stymie lottery sales, do you really think an article about lottery neighbors having a whopping 2% increase in bankruptcies is going to have any effect on ticket purchases? Seriously? It isn't about income inequality, it isn't about the lottery. It's about stupid people buying things they can't afford. The end. Your ranting about this makes no sense.

              Artist77's avatar - batman14

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              January 16, 2012
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              Posted: February 20, 2016, 6:55 am - IP Logged

              I agree with Golfer. That sample of 13 is insignificant and it looks like they kept reducing the sample size to achieve a predetermined result. I think they wanted publicity for their "research." Hopefully someone will redo the study and show it is ridiculous. And yes, I read the study and know that is one zip code but 13 is still too small a sample size.

              J'aime La France.

                Teddi's avatar - Lottery-008.jpg

                United States
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                May 13, 2013
                1183 Posts
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                Posted: February 20, 2016, 7:25 am - IP Logged

                I Agree! there was a movie with Demi Moore called The Joneses that touched on this.

                I thought I was the only one who saw it. LOL. This study made me think of that movie too. 

                For those who didn't see it, a corporation puts actors into upper middle-class neighbourhoods, posing as perfect families. They give the appearance of the family everyone else wants to be. 

                Pretty soon the other wives are buying the same types of furniture, packaged foods and hair products Mrs Jones has, the men are buying the same golf clubs and big screen tv Mr Jones has, ditto with the teens on clothes and video games. Meanwhile, the corporation monitors the uptick in sales on those items and rewards them accordingly. It all works great until you get the one neighbor who tries hard to keep up but can't afford to. The movie wasn't that great but the premise was spot on.

                  HoLeeKau's avatar - YheaShea
                  Idaho
                  United States
                  Member #94283
                  July 17, 2010
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                  Posted: February 20, 2016, 11:14 am - IP Logged

                  I agree with Golfer. That sample of 13 is insignificant and it looks like they kept reducing the sample size to achieve a predetermined result. I think they wanted publicity for their "research." Hopefully someone will redo the study and show it is ridiculous. And yes, I read the study and know that is one zip code but 13 is still too small a sample size.

                  The sample averaged 13 for each lottery winner's neighbors they followed.  I think 13 might actually be too big because they wanted to know how the winner's increased conspicuous consumption affected those living around them.  I might notice what 8 of my neighbors purchase if it's parked in front of their home, but I really doubt I'd notice any further away than that.

                  Plus, they said the bankruptcies went up 2% for each 1K of the prize.  So that could be a very significant increase if you live next door to someone who doesn't win enough that they move to a gated community but win enough to instead remodel their home and buy luxury cars and boats and other visible things.  So if I won 200K after taxes that certainly wouldn't be enough for me to afford a nicer home, so I'd just stay here and hope the one house with the obnoxious neighbors goes bankrupt and has to move.

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                    NY
                    United States
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                    October 16, 2005
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                    Posted: February 20, 2016, 1:26 pm - IP Logged

                    "they said the bankruptcies went up 2% for each 1K of the prize.  So that could be a very significant increase if ..."

                    Here's a novel idea. Imagine that somebody wins 200k and bankruptcies increase by 400%. You think that's significant?

                    Now imagine that your chances of winning PB increase by 400% to 1 in 73 million. You think that's significant?