The hat also acts as a tier 2 luck enhancer, similar to the ring of wealth. When worn, the hat slightly increases the chances for certain unique drops and rewards that are affected by the luck mechanic. As with other tier 2 luck enhancers, it affects chances for drops and rewards in tier 1 too.
The hat shines whenever a rare drop is received, not necessarily when the hat impacted the drop. When it shines, the following message is shown: Your leprechaun hat shines more brightly! For drops this is replaced by Your ring of luck shines brightly! You got a lucky drop!