Skip to content
Subscriber Only

Keeping Up With the Joneses: Neighbors of Lottery Winners Are More Likely to Go Bankrupt

Seeing someone else get rich puts people into spending mode
An Ontario Lottery and Gaming Corp. outlet at Toronto’s Union Station. 

An Ontario Lottery and Gaming Corp. outlet at Toronto’s Union Station. 

Photographer: Torontonian/Alamy

As if you needed proof that trying to keep up with the Joneses isn’t a good idea, here it is: Close neighbors of lottery winners in Canada tended to spend more on conspicuous goods, put more money into speculative investments such as stocks, borrow more money—and eventually declare bankruptcy.

“The larger the dollar magnitude of a lottery prize of one individual in a very small neighborhood, the more subsequent bankruptcies there will be from other individuals in that neighborhood,” says the latest version of a working paper from the Federal Reserve Bank of Philadelphia by Sumit Agarwal of Georgetown University, Vyacheslav Mikhed of the Philadelphia Fed, and Barry Scholnick of the University of Alberta. It’s titled: “Does the Relative Income of Peers Cause Financial Distress? Evidence from Lottery Winners and Neighboring Bankruptcies.”