The Fiscal Impact of Legalized Casino Gambling

Abstract

We examine the fiscal impact of legalized casino gambling, including Indian casinos. Our study examines the impact this legalization had on counties where casinos were located. Using county-level data between 1987 and 2007 and difference-in-differences estimation, we examine the impact of casino openings on county area government revenues, expenditures, sales tax revenues, and education expenditures. Our results indicate that casinos did not have a statistically significant impact on per capita government expenditures and revenues. However, this was due to differential impacts between commercial and Indian casinos and revenue-sharing legislation between states and counties. There is minimal evidence of a net impact on sales tax revenues in the counties where new casinos opened and some evidence, albeit weak, that Indian casinos are associated with lower county education expenditures. The results are robust when using propensity score matching results accounting for the endogeneity of casino location and spatial lag and error regressions.