Education’s gambling problem: The impact of earmarking lottery revenues for education on charitable giving and government spending

I examine the impact that lotteries introduced to support education have on overall funding for education. Using donor-level survey data and nonprofit tax returns, I find that donations to education-related organizations fall with the introduction of a lottery. This result seems to be driven by donors’ response to the new (highly publicized) government revenue source (rather than a decrease in nonprofit fundraising efforts), highlighting the role of salience of government activity in charitable crowd-out. Additionally, I find no evidence that states significantly increase their education expenditures. Thus, education lotteries may decrease overall funding for education.