Estimating the Effect of Unearned Income by Imbens, Rubin and Sacerdote - Article Example

Previous studies had been done yielding different results depending on the type of unearned income and age of winners among others. For instance, a study showed that such income when given to young people usually resulted in increased consumption while a decrease in savings. Such studies were met with issues such as differentiating consumption and investment. The empirical study of the paper is to establish the indisputable fact that unearned income usually results in a decrease in labor earnings while resulting in an increase in savings and consumption.

The empirical study would reveal this by observing actual statistics. The authors found that indeed unearned income in this case lottery winnings usually resulted in a decrease in labor earnings while consumptions and savings increased. For instance, they observed that 16 percent of the prize won was usually directed to savings (Imbens, Rubin & Sacerdote 779). An issue that presents itself in this study is the fact that determining whether people will provide the truth on how they used their money.

For instance, it is hard for a responder to indicate that they blew away their money on drugs.