Is video gambling terminal placement and spending in Illinois correlated with neighborhood characteristics?

Abstract

The operation of video gambling terminals (VGTs) in Illinois has been increasing since they were legalized in 2009, then implemented in 2012. Past research has found that while gambling expenditures are positively correlated with income, they are also regressive in that, as a proportion of individual income, they are negatively correlated with income. Very little research has focused on the effects of VGTs, particularly those located in non-casino establishments. Unlike the state lottery, another form of widespread gambling outside of casinos, VGTs, also known as slot machines, are a form of gambling where substantial amounts of money can be lost quickly. We seek to provide evidence on how their proliferation and revenues relate to income and other neighborhood characteristics. Using detailed VGT revenue data from the Illinois Gaming Board from 2017 and demographic data from the 2016 5-year American Community Survey, this study investigates the relationships of the number of VGTs in operation, and the expenditures on VGTs with the local poverty rate and other socioeconomic variables at the zip code level. Our results indicate that a 1 percentage point higher poverty rate is associated with 1.47% higher VGT expenditures per capita, and 1.17% more VGTs per 10,000 population. The OLS results are not significantly biased by sample selection or spatial auto-correlation. These findings suggest that VGT gambling is negatively correlated with neighborhood income which implies that the taxation of VGT revenue is a regressive tax policy.