Why Lottery Winners Go Bankrupt

Callie Rogers blew a 2003 U.K. lottery jackpot of $3 million on shopping, cocaine, friends and breast augmentation and told reporters two years ago she was working as a maid. William "Bud" Post squandered his 1988 Pennsylvania prize of more than $16 million on houses, vehicles and bad businesses before going bankrupt and serving time for firing a shotgun at a bill collector before his death in 2006.

Are these outcomes rare? A recent study of Florida lottery winners suggests no.

Economists at the University of Kentucky, University of Pittsburgh and Vanderbilt University wanted to answer a public policy question: What happens when individuals in financial trouble are given large lump sums? So they collected data from nearly 35,000 winners of up to $150,000 in Florida's Fantasy 5 lottery from 1993 to 2002, and cross-referenced this information with state bankruptcy records.

Their findings, published last fall in The Review of Economics and Statistics, show that a big lottery score does little to reduce the likelihood of bankruptcy.

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