An empirical analysis of the use of the Herfindahl-Hirschman Index in assessing the distribution of electronic gaming machines and its socio-economic implications

Abstract

Sargent and Holmes (2014) proposed the use of the Herfindahl-Hirschman Index in assessing the effects of the distribution of electronic gaming machines (EGMs) on expenditure and tax outcomes for local areas. This paper reports empirical analysis on the use of the Herfindahl Hirschman Index (HHI) in this application. Comparative testing of HHI and population-based measures, such as EGM density, was conducted using EGM data from the New South Wales State Government (Australia) for the period 1995 to 2005. The analysis also compares the use of the commonly used Australian Bureau of Statistics’ (ABS) Socio-Economic Indexes for Areas (SEIFA) Index of Relative Socio-Economic Disadvantage, with the Index of Education and Occupation. The socio-economic elements comprising the latter index are acknowledged as being relevant to the assessment of gambling impacts. The results indicate that the use of a concentration measure such as the HHI may augment the use of existing measures in policy development and localized decision-making on distribution of gambling facilities.