Productivity Measurement in Gambling: Plant‐level Evidence from the United Kingdom

Abstract

Although gambling is one of the fastest‐growing service industries, there have been no studies of total factor productivity (TFP) in this sector. We attempt to fill this gap using establishment‐level data from the United Kingdom. We also discuss key measurement issues in calculating gambling productivity and estimate labor and TFP equations, based on a stochastic frontier production function framework, focusing in particular on the impact of information technology on productivity. Our preliminary results suggest that the production function models fit well, generating plausible elasticity estimates. We find consistent evidence that productivity increased following major reforms to gambling taxation in 2001. Our findings yield limited evidence of regional variations in efficiency. Another key preliminary result is that internet operations appear to be associated with higher relative efficiency.