Casinos have become a popular form of entertainment, but there are some concerns about the impact they have on local economies. While casinos can bring a lot of business to cities, the competition between casinos in a given region can diminish the economic benefits for a community.
Urban casinos
The proliferation of urban casinos in major metropolitan cities has changed the landscape of these areas. However, the effects of these establishments on the local economy are not well understood. Hence, more research is needed.
While casinos may help to increase economic activity in a neighborhood, their negative side effects could be a boon to crime. In addition, their presence may lure local residents into self-destructive behaviors. And, as a result, local economies could actually look worse than they were before the casino’s arrival.
Although research on urban casinos is in its infancy, there are some notable studies that show how the establishment of gambling outlets impacts the local economy. One example is the presence of video lottery terminals, also known as racinos.
Another example is the influx of other businesses that may not be of interest to the gambling public. For instance, fast food chains have been known to create clusters of bad behavior in the surrounding area.
Taxes on legalized gambling
Gambling is a popular way for states to raise revenue. The revenue is often earmarked for social good programs. It may also benefit the local economy. However, the growth in casino tax revenue does not seem to keep pace with the growth in the overall economy.
As a result, the economic effects of gambling can be mixed. Some studies have found that it may have a cannibalizing effect on other businesses. In addition, fewer states have taken measures to restrict gambling. This can lead to an expansion of casinos.
One of the simplest ways to raise revenue through gambling is to tax the casino. However, this type of tax does not provide the monetary benefit of an increase in sales taxes. Most states transfer most of the gambling tax revenue to the general fund.
Demographic analyses reveal that certain disadvantaged socioeconomic groups tend to gamble proportionally greater amounts of their overall income
A recent study in Finland investigated the socioeconomic profile of individuals and households, revealing that certain disadvantaged socioeconomic groups tend to gamble proportionally more of their overall income than other socioeconomic groups. The study used data on gambling expenditures, which was collected from 94% of respondents in Finland.
The data were then analyzed to identify associations between gambling expenditures and correlates. Results indicated that age, marital status, education, perceived general health, and the level of net income were all significant. Combined, these correlates explained 71% of the variation in MGE/NI.
As with other studies, the results showed that individual measures of socioeconomic status were not perfectly correlated with household measures. Some correlates were excluded from models to avoid multi-collinearity. For instance, the types of games gambled were removed to avoid multi-collinearity.
Competition between casinos diminishes regional economic benefits
The growth of commercial casinos in the United States has generated much debate regarding their role in regional economic development. While some studies suggest that the introduction of casinos can provide positive impacts on local employment, others conclude that the industry may have unintended negative effects.
Casinos are also expected to bring in problem gamblers. In addition, they will attract tourists, and these visitors will spend money in the local area. This is considered a substitution effect. It affects local retail sales.
As competition for casino tax dollars increases, cities are under pressure to keep their casinos open and jobs intact. Cities will have to consider their own economic benefits and their competing economic interests before allowing new casinos. During the Great Recession, some states expanded gambling operations.
Market saturation effect
As commercial casinos continue to proliferate across the U.S., there is a growing concern about their effect on regional economic development. This Economic Brief looks at some of the research literature on the impact of commercial gambling on local economies.
Casinos in the Northeast tend to be located in lower socioeconomic communities. They can be a draw for tourist vacations, but they can also negatively affect neighboring property values. In addition, they can contribute to problem gambling in disadvantaged neighborhoods.
Some studies suggest that racinos can improve regional economies. However, these benefits are not enough to offset the costs.
Another study finds that casinos can increase county-level violent crimes. The casino industry has been linked to alcohol-related fatal traffic accidents.
Overall, casinos are thought to have a positive impact on local unemployment rates. A local unemployment rate is calculated by the number of unemployed persons divided by the labor force.