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Abstract:

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CEP Discussion Paper
Do You Have To Win It To Fix It? A Longitudinal Study of Lottery Winners and Their Health Care Demand
Terence C. Cheng, Joan Costa Font and Nattavudh Powdthavee March 2015
Paper No' CEPDP1339:
Full Paper (pdf)

JEL Classification: H42; I11; D1


Tags: lottery wins; health care; income elasticity; public-private

We exploit lottery wins to investigate the effects of exogenous changes to individuals' income on health care demand in the United Kingdom. This strategy allows us to estimate lottery income elasticities for a range of health care services that are publicly and privately provided. The results indicate that lottery winners with larger wins are more likely to choose private health services than public health services from the National Health Service. The positive effect of wins on the choice of private care is driven largely by winners with medium to large winnings (win category > $500 (or US$750); mean = $1922:5 (US$2,893.5), median = $1058:2 (US$1592.7)). For privately-insured individuals, larger winners are more likely to obtain private care for dental services and for eye, blood pressure, and cervical examinations. For individuals without private insurance, lottery wins have no effect on the choice of public or private care. We find that medium to big winners are more likely to have private medical insurance. Large winners are also more likely to drop coverage earlier, possibly after their winnings have been exhausted. The elasticities with respect to lottery wins are comparable in magnitude to the elasticities of household income from fixed effect models.