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Casino tourism, social cost and tax effects

Author

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  • Xinhua Gu
  • Guoqiang Li
  • Pui Sun Tam

Abstract

Local economic growth can be spurred by casino tourism, yet this may take place at the expense of the external regions where tourists live. We show that Pigouvian taxes should be imposed on gambling activity to attenuate its external cost. The tax may boost social welfare in the local and external communities even though casinos and tourists incur certain private losses due to their tax burdens. The tax can also mitigate gaming-biased unbalanced growth via resource reallocation, and improve the terms of trade for local welfare enhancement through tourism as an exporting industry. If taxes are collected from tourists but not fully refunded, local tax policy then plays the dual roles for both social cost reduction and public revenue generation. Our empirical study suggests the importance of casino taxation for preventing the 'exported' social cost from coming back to hurt the local economy, for too much such exportation may trigger visa policy restrictions by tourists' home communities.

Suggested Citation

  • Xinhua Gu & Guoqiang Li & Pui Sun Tam, 2013. "Casino tourism, social cost and tax effects," International Gambling Studies, Taylor & Francis Journals, vol. 13(2), pages 221-239, August.
    • Handle: RePEc:taf:intgms:v:13:y:2013:i:2:p:221-239
    DOI: 10.1080/14459795.2012.760641
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    References listed on IDEAS

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    1. Douglas M. Walker, 2007. "The Economics of Casino Gambling," Springer Books, Springer, number 978-3-540-35104-7, June.
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    Cited by:

    1. Gu, Xinhua & Wu, Jie & Guo, Haizhen & Li, Guoqiang, 2018. "Local tourism cycle and external business cycle," Annals of Tourism Research, Elsevier, vol. 73(C), pages 159-170.
    2. Xinhua Gu & Pui Sun Tam, 2014. "Market structure and casino taxation in tourist resorts," Applied Economics, Taylor & Francis Journals, vol. 46(10), pages 1049-1057, April.
    3. Metaxas, Theodore & Folinas, Sotiris, 2016. "Gambling Tourism and Economic Development: Some lessons from Macao," MPRA Paper 72397, University Library of Munich, Germany.
    4. Han, Jinil & Papavasiliou, Anthony, 2015. "Congestion management through topological corrections: A case study of Central Western Europe," Energy Policy, Elsevier, vol. 86(C), pages 470-482.
    5. Woo‐Hyuk Kim, 2018. "Performance drivers in the casino industry of South Korea," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 32(2), pages 126-134, November.
    6. Gu, Xinhua & Tam, Pui Sun, 2014. "Tax incidence and price discrimination: An application of theories to gambling markets," China Economic Review, Elsevier, vol. 28(C), pages 135-151.

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