, Volume 142, Issue 1-2, pp 69-90
Date: 01 Jul 2009

Determinants of the probability and timing of commercial casino legalization in the United States

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The adoption of lotteries by state governments has received significant attention in the economics literature, but the issue of casino adoption has been neglected by researchers. Casino gambling is a relatively new industry in the United States, outside Nevada and New Jersey. As of 2007, 11 states had established commercial casinos; several more states are considering legalization. We analyze the factors that determine a state’s decision to legalize commercial casinos, using data from 1985 to 2000, a period which covers the majority of states that have adopted commercial casinos. We use a tobit model to examine states’ fiscal conditions, political alignments, intrastate and interstate competitive environments, and demographic characteristics, which yields information on the probability and timing of adoptions. The results suggest a public choice explanation that casino legalization is due to state fiscal stress, to efforts to keep gambling revenues (and the concomitant gambling taxes) within the state, and to attract tourism or “export taxes.”

Earlier versions of this paper were presented at the 2008 Southern Economic Association and 2008 Association of Private Enterprise Education. We would like to thank the participants in those sessions for their helpful comments. We would also like to thank the participants of the College of Charleston Department of Economics and Finance Seminar Series. Finally, we would like to acknowledge the anonymous referees from whose comments we greatly benefited. The usual caveats apply.