When the family is lucky fat After the lottery, it’s possible that his economy will turn upside down like a sock, and that, in the greatest distress imaginable, he might be moved to consider a future trip to the moon with Elon Musk.
But what happens in the province when the Gordo de Nadal River falls? A report recently published by the Bank of Spain finds evidence that the Spanish Christmas Lottery prizes stimulate economic activity in the winning regions and that this happens thanks to optimism that also spreads among those unlucky in the Gordo draw.
The report, titled “The Emotional Diffusion of Lottery Prizes: Evidence from the Spanish Christmas Lottery,” states that “lottery winnings lead to significant demand effects that lead to growth in car purchases, lower unemployment, increased employment, and a moderate increase in price index prices.” Consumers at the provincial level.
Lottery shots
The authors link these effects to the fact that “households residing in lucky lottery counties, even though they do not receive a direct prize, become more optimistic about the future of the economy.” This fact has a lot to do with the features of the social phenomenon that constitutes the Christmas lottery in Spain: its large size and the enormous amount of prizes; Focus of the awards on people living in the same governorate and high level of participation.
“Despite not receiving lottery prizes, consumers in the winning provinces became more optimistic about Spanish macroeconomic conditions,” the report said. “Motor vehicle licenses increase by 10 percentage points in winning counties” in the first six months after winning the lottery, the authors wrote.
The study is based on reference data from the Christmas Lottery and the Consumer Confidence Survey conducted by the Center for Social Research (CIS).
“Households’ feelings about the future of the Spanish economy improve after winning the lottery, according to the report’s authors. This is confirmed when we look at regions with active separatist movements, such as Catalonia and the Basque Country, where people can clearly distinguish between national and regional circumstances,” they added. In these two regions, confidence in the development of the Spanish economy also improved after the acquisition of Gordo.
Emotional effects
“The morale effects of lottery prizes do not differ significantly in areas with separatist movements. Therefore, increased morale appears to be the only plausible explanation for the positive reaction of consumer confidence to the Spanish economy after winning the lottery,” the researchers concluded.
Verification of the data provided by the survey leads to the conclusion that the most intense improvement in expectations occurs in the profile of consumers “young, less educated, unemployed and low-income” and, above all, in times of recession.
The combination of this influx of millions and contagious optimism leads, for example, to the fact that after a county wins the lottery with an average of €1,000 per capita, the unemployment rate slowly declines until it reaches its maximum decline (0.3 percentage points) after one year. It remains significantly lower 20 months after the initial effect.
Price effects are also revealed: inflation in the winning county increases significantly seven months after the draw, peaks 17 months after the shock, and remains above average for approximately two years after the shock. These higher price pressures are due to the fact that “living in prize-winning territories significantly increases the odds that households will report an increase in their future consumption by about 2 to 3 percentage points in the four months following their lottery win.”
Las Palmas house
In the 2021 draw, Gordo was distributed mainly in the Atocha station in Madrid (516 million), in Las Palmas de Gran Canaria (160 million), in Santoña (Cantabria, 4 million) and Ayamonte (Helva, 4 million).
In the four years leading up to Christmas 2021, the average unemployment rate in Las Palmas was 22.11%, seven points higher than the state average for the same period (15%). After receiving the 2021 Gordo Prize, Las Palmas reduced its unemployment rate by 4.9 points over the course of 2022. As for inflation, it became half a point higher than the state average after the award.
The Bank of Spain study is not the first to identify relationships between Christmas lottery data and the economy. The same authors cite other previous studies that have shown, for example, that the political party in power tends to get proportionately more votes in those districts that won Gordo in election years; Or to create businesses and increase employment in the winning counties. However, this study focuses its analysis on the “emotional diffusion of lottery prizes” or, similarly, on its impact on the confidence and expectations of economic actors.
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