Let’s turn the mike over to Alex, our Alex, the Alex, etc., the one who writes for MarginalRevolution:
The rags to riches to rags story of a poor, unemployed fellow who wins the lottery, blows the cash, and ends up just as poor and unemployed as he began is a common trope. (Here is a classic in the genre). In a paper just published in the Review of Economics and Statistics (gated, free version here), Hankins, Hoekstra and Skiba argue that the rags to riches to rags story has a systematic component.
The authors link records of lottery winners to bankruptcy records. The use of the lottery is a great randomization device, although obviously it restricts the sample to people who play the lottery.
The central finding is this: people who win large amounts are just as likely to end up bankrupt as people who win small amounts…
Here is more, hat tip goes to Slocum.
Addendum: Floccina writes in the comments: “Former professional athletes are also an interesting case.” Are the economic variables really driving the dysfunctional social norms, or vice versa, or most likely quite a bit of both?