{"id":2157,"date":"2016-02-26T09:00:33","date_gmt":"2016-02-26T16:00:33","guid":{"rendered":"http:\/\/blogs.pugetsound.edu\/econ\/?p=2157"},"modified":"2016-02-28T16:21:25","modified_gmt":"2016-02-28T23:21:25","slug":"your-neighbor-winning-the-lottery-might-send-you-into-bankruptcy","status":"publish","type":"post","link":"https:\/\/blogs.pugetsound.edu\/econ\/2016\/02\/26\/your-neighbor-winning-the-lottery-might-send-you-into-bankruptcy\/","title":{"rendered":"Your Neighbor Winning the Lottery Might Send You into Bankruptcy"},"content":{"rendered":"<p><a href=\"http:\/\/blogs.pugetsound.edu\/econ\/files\/2016\/02\/Money-Pile.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"  wp-image-2164 aligncenter\" src=\"http:\/\/blogs.pugetsound.edu\/econ\/files\/2016\/02\/Money-Pile-300x200.jpg\" alt=\"Money-Pile\" width=\"375\" height=\"253\" \/><\/a><\/p>\n<p>Most of us are familiar with the idea that winning the lottery can sometimes backfire: having so much money at once might not allow you to learn how to spend, friends and family can wear you down, the list goes on &#8211; but what about how it affects your neighbors?<\/p>\n<p>The Federal Reserve of Bank recently released a <a href=\"\/\/\/Users\/raineblack\/Downloads\/wp16-04.pdf\">working paper<\/a> showing how income inequality can cause financial distress, specifically if it&#8217;s caused by\u00a0exogenous shocks (like winning the lottery). Researchers saw an increase in bankruptcy filings when someone in a neighborhood won a lottery (2.4% to be exact).<\/p>\n<p>Homes and cars would increase in value, with more visible wealth (fancy food, clothes, furniture, etc.) and less invisible wealth (like investments). Visible wealth is not a sign of financial distress on its own &#8211; buying\u00a0visibly expensive things and signal to others is common &#8211; but accumulating mostly visible wealth doesn&#8217;t allow for much in returns. It&#8217;s simply a way to signal or demonstrate to the lottery winner.<\/p>\n<p>According to the paper: for every $1,000 increase in lottery winnings, bankruptcy filings would increase 2.4% &#8211; the bottom line being that neighbors are driven to <a href=\"http:\/\/blogs.wsj.com\/economics\/2016\/02\/16\/why-you-might-go-bankrupt-if-your-next-door-neighbor-wins-the-lottery\/\">overspending<\/a> in order to keep up with the lottery winner(s), until they have nothing left.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Most of us are familiar with the idea that winning the lottery can sometimes backfire: having so much money at once might not allow you to learn how to spend, friends and family can wear you down, the list goes on &#8211; but what about how it affects your neighbors? The Federal Reserve of Bank recently released a working paper showing how income inequality can cause financial distress, specifically if it&#8217;s caused by\u00a0exogenous shocks (like winning the lottery). Researchers saw an increase in bankruptcy filings when someone in a neighborhood won a lottery (2.4% to be exact). Homes and cars <a class=\"more-link\" href=\"https:\/\/blogs.pugetsound.edu\/econ\/2016\/02\/26\/your-neighbor-winning-the-lottery-might-send-you-into-bankruptcy\/\">Continue reading <span class=\"screen-reader-text\">  Your Neighbor Winning the Lottery Might Send You into Bankruptcy<\/span><span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":451,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[131,351,353,352],"class_list":["post-2157","post","type-post","status-publish","format-standard","hentry","category-economics","tag-income-inequality","tag-lottery","tag-neighbors","tag-overspending"],"_links":{"self":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/2157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/users\/451"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/comments?post=2157"}],"version-history":[{"count":5,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/2157\/revisions"}],"predecessor-version":[{"id":2184,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/2157\/revisions\/2184"}],"wp:attachment":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/media?parent=2157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/categories?post=2157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/tags?post=2157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}