Casinos and Economic Growth: An Update

Abstract

As U.S. politicians and voters continue to grapple with the slower-than-expected recovery from the 2007-09 recession, the legalization (or expansion) of commercial casinos has become an increasingly popular policy. Casinos are politically popular because the state government legalizes them, and can thus create a new industry which pays high taxes and may stimulate employment and economic development. Despite the fact that casinos are now widespread in the United States – there are around 1,000 commercial and tribal casinos – the empirical evidence on their economic impacts is still negligible.In two previous studies ( we have tested the relationship between state-level casino revenues and per capita income (i.e., economic growth) to provide evidence on whether or not casinos have a positive economic impact on states’ economies. We have utilized a Granger causality model modified for use with panel data. Our initial evidence, from a paper published in 1998, indicated that casinos do Granger cause economic growth. However, when we re-tested the model using up-to-date data (at the time, through 2005), we found no significant results. The casino industry has grown extensively since 2005, and although the recession of 2007-09 had a negative impact on the casino industry, the national-level revenue numbers are again climbing.We extend our previous analyses in order to provide updated evidence on the economic growth impact of commercial casinos in the United States. Section 2 provides a more detailed background of our previous analysis and an overview of other relevant literature. Section 3 describes the data and model, and provides the results. Section 4 is a discussion and conclusion.