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The Leviathan Lottery? Testing the Revenue Maximization Objective of State Lotteries as Evidence for Leviathan

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  • Garrett, Thomas A

Abstract

Unlike other governmental units, state lottery agencies publicly acknowledge that their primary objective is revenue maximization. This claim and the inherent monopoly power of lottery agencies provides a unique arena to test for Leviathan. With data obtained from United States lottery games, I perform a Laffer curve analysis to derive the optimal lottery tax rates for different categories of games. These optimal tax rates and Monte Carlo simulations are then used to test whether the current tax structure of lottery games is indeed the revenue maximizing structure. I find strong empirical evidence for the "Leviathan Lottery". Copyright 2001 by Kluwer Academic Publishers

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  • Garrett, Thomas A, 2001. "The Leviathan Lottery? Testing the Revenue Maximization Objective of State Lotteries as Evidence for Leviathan," Public Choice, Springer, vol. 109(1-2), pages 101-117, October.
    • Handle: RePEc:kap:pubcho:v:109:y:2001:i:1-2:p:101-17
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    Citations

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    Cited by:

    1. Thomas A. Garrett & Russell S. Sobel, 2004. "State Lottery Revenue: The Importance of Game Characteristics," Public Finance Review, , vol. 32(3), pages 313-330, May.
    2. George Crowley & Russell Sobel, 2011. "Does fiscal decentralization constrain Leviathan? New evidence from local property tax competition," Public Choice, Springer, vol. 149(1), pages 5-30, October.
    3. William F. Shughart II & Josh T. Smith, 2020. "The broken bridge of public finance: majority rule, earmarked taxes and social engineering," Public Choice, Springer, vol. 183(3), pages 315-338, June.
    4. Joylynn Pruitt & Joshua C. Hall, 2017. "Are state governments revenue maximizers? Evidence from the sales tax," Economics Bulletin, AccessEcon, vol. 37(4), pages 2945-2950.
    5. Gary A. Wagner & Douglas M. Walker, 2021. "Did video gaming expansion boost municipal revenues in Illinois?," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 649-679, October.
    6. repec:wvu:wpaper:10-16 is not listed on IDEAS
    7. Peter Calcagno & Douglas Walker & John Jackson, 2010. "Determinants of the probability and timing of commercial casino legalization in the United States," Public Choice, Springer, vol. 142(1), pages 69-90, January.
    8. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    9. Douglas M. Walker & John D. Jackson, 2008. "Do U.S. Gambling Industries Cannibalize Each Other?," Public Finance Review, , vol. 36(3), pages 308-333, May.

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