A generalized double-hurdle model of Swedish gambling expenditures

Abstract

This article estimates the relationship between demand for Swedish gambling, income and the other socioeconomic variables using empirical models of participation and gambling expenditure. It also indirectly attempts to account for the effect of a recent recession on gambling behaviour by examining gambling behaviour when the economy was growing versus the period immediately after a major recession. The aim of the article is to analyse the factors influencing gambling decisions. This is done using the double-hurdle method adjusted for the problems of heteroscedasticity and nonnormality using an approach that can handle extreme values and address skewness. The empirical results ruled out Tobit-type models and normally distributed double-hurdle models. The pattern on income elasticities across income classes implies that implicit Swedish gaming taxes are regressive. Income elasticities become smaller after the recession and the decision to participate changed with respect to the several of the demographic variables.