Abstract
Little is known about the impact of illicit drugs use on economic decision-making, yet the associated costs are likely large. The paper addresses this gap by studying the U.S. casino industry and conservatively estimates that a drugs-using gambler loses almost three times more money than the average gambler ($1,217 vs. $443 annually). To reach these conclusions, I use state-fixed effects panel estimations for 11 casino states for the period 1998-2004. Since drug-related arrests are associated with the presence of casino activity, I use arrests for the possession of drugs by adults in or near counties with casino activity as a proxy for the number of illicit drugs-using gamblers. I find robust evidence that state-level casino gambling revenues (per casino employee and per casino visit) are positively associated with these drugs possession arrests, even after controlling for the scale of casino activity, state-level (drugs) arrests and other regional characteristics. I use an instrumental variable approach to address endogeneity concerns.
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