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The Importance of Self-Selection in Casino Cannibalization of State Lotteries

Author

Listed:
  • Jonathan Rork

    (Vassar College)

  • Stephen Fink

    (Vassar College)

Abstract

This note extends the work of Elliott and Navin (2002) on the substitutability of commercial casinos and state lotteries by controlling for a potential negative selection bias. We utilize a Heckman two-step selection correction in which our first stage probit involves whether or not a state has legalized commercial casinos. Results indicate that a $1 increase in state casino tax revenue will reduce net lottery proceeds by $0.56. This estimate is 33% smaller than what has been found in other studies, which is consistent with a negative selection bias.

Suggested Citation

  • Jonathan Rork & Stephen Fink, 2003. "The Importance of Self-Selection in Casino Cannibalization of State Lotteries," Economics Bulletin, AccessEcon, vol. 8(10), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-03h70001
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    References listed on IDEAS

    as
    1. Donald S. Elliott & John C. Navin, 2002. "Has Riverboat Gambling Reduced State Lottery Revenue?," Public Finance Review, , vol. 30(3), pages 235-247, May.
    2. Alm, James & McKee, Michael J. & Skidmore, Mark, 1993. "Fiscal Pressure, Tax Competition, and the Introduction of State Lotteries," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(4), pages 463-476, December.
    3. Alm, James & McKee, Michael J. & Skidmore, Mark, 1993. "Fiscal Pressure, Tax Competition, and the Introduction of State Lotteries," National Tax Journal, National Tax Association, vol. 46(4), pages 463-76, December.
    4. Charles T. Clotfelter & Philip J. Cook, 1989. "Selling Hope: State Lotteries in America," NBER Books, National Bureau of Economic Research, Inc, number clot89-1.
    5. Gary C. Anders & Donald Siegel & Munther Yacoub, 1998. "Does Indian Casino Gambling Reduce State Revenues? Evidence From Arizona," Contemporary Economic Policy, Western Economic Association International, vol. 16(3), pages 347-355, July.
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    Cited by:

    1. Melissa S. Kearney, 2005. "The Economic Winners and Losers of Legalized Gambling," NBER Working Papers 11234, National Bureau of Economic Research, Inc.
    2. Hasret Benar & Glenn Jenkins, 2008. "The economics of casino taxation," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 63-73.
    3. Mark W. Nichols & Mehmet Serkan Tosun & Jingjing Yang, 2015. "The Fiscal Impact of Legalized Casino Gambling," Public Finance Review, , vol. 43(6), pages 739-761, November.
    4. Will E. Cummings & Douglas M. Walker & Chad D. Cotti, 2017. "The Effect Of Casino Proximity On Lottery Sales: Evidence From Maryland," Contemporary Economic Policy, Western Economic Association International, vol. 35(4), pages 684-699, October.
    5. Hasret Benar & Glenn Jenkins, 2006. "Regulation And Taxation Of Casinos Under State-monopoly, Private Monopoly And Casino Association Regimes," Working Paper 1056, Economics Department, Queen's University.
    6. Kent Grote & Victor Matheson, 2011. "The Economics of Lotteries: An Annotated Bibliography," Working Papers 1110, College of the Holy Cross, Department of Economics.
    7. Brown, Ryan P. & Rork, Jonathan C., 2005. "Copycat gaming: A spatial analysis of state lottery structure," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 795-807, November.
    8. Douglas M. Walker & John D. Jackson, 2008. "Do U.S. Gambling Industries Cannibalize Each Other?," Public Finance Review, , vol. 36(3), pages 308-333, May.

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    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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