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STATE OF EVIDENCE REVIEW:

SOCIETAL AND ECONOMIC IMPACT OF GAMBLING

DOUG WALKER, PH.D., LIA NOWER, JD, PH.D., KAREN CHOI, PH.D., & JUDITH GLYNN, M.SC. NOVEMBER 11, 2015

TABLE OF CONTENTS

Introduction ................................................................................................................ 2 Methodology .............................................................................................................. 3 Research Quality Assessment ................................................................................... 3 General Studies ......................................................................................................... 4 Economic Impacts ...................................................................................................... 5

Employment ........................................................................................................... 6 Tax revenues ....................................................................................................... 10 Economic Growth ................................................................................................. 11 Inter-industry relationships ................................................................................... 13 Market saturation .................................................................................................. 14 Summary of economic impacts ............................................................................. 15

Social Impacts ......................................................................................................... 15 Quality of life ........................................................................................................ 15 Casinos and crime ................................................................................................ 16 Gambling disorder and crime ................................................................................ 19 Debt and bankruptcy ............................................................................................ 21 Social inequality ................................................................................................... 22 Social costs and estimates ................................................................................... 23

Conclusions and future directions ............................................................................ 25 References .............................................................................................................. 28

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INTRODUCTION

Research on the societal and economic impacts of gambling is surprisingly scant, given the recent expansion of legalized gambling, particularly casino gambling, across North America and the world. A majority of the published research in this area focuses on economic and social issues in North America and has been published primarily in the last 20 years. The political motivations for casino legalization may be so strong that legislators see little need to truly understand the economic and social impacts of gambling. Nevertheless, the expansion of the casino industry in North America, particularly in the United States, has changed the regional economic landscape significantly during the past two decades. This review focuses primarily on the economic and social impacts of casino gambling in North America, as discussed in literature published since the 1990s. Included are three major sections: “General Studies” discusses “general” versus “specific” literature; “Economic Impacts” examines the economic impacts of casinos; and “Social Impacts” discusses the various social impacts of legalized casino gambling. A “Conclusions and Future Directions” section summarizes the state of research in this area1. The References section includes a list of selected publications, many of which are cited within this review.

The growth of the casino industry in North America has taken place primarily over the last 25 years. There are now 100 casinos and “racinos” (or racetrack casinos) in Canada and approximately 1,000 in the United States2. This expansion results from a variety of factors, beginning with the 1987 Supreme Court decision that legalized tribal casinos in the United States. Legislators subsequently began considering the legalization of commercial casinos in order to supplement state coffers, create jobs, and attract tourists. One study identified “fiscal stress” and efforts to keep gambling revenues/taxes within the state as key determinants of casino legalization in the United States (Calcagno, Walker, & Jackson, 2010)3. The growth of the casino industry, along with expansion of gambling to online and other interactive gaming formats, has generated increased concern for problem gambling and the social costs attributable to gambling and problem gamblers. These negative social impacts represent the key variables on the cost side of the cost-benefit analysis of legalized gambling. The

1 Some of the material in this review is adapted from D. Walker, “The Debate Over Legal Casino

Gambling,” in A. Cabot and N. Pindell, Eds., Regulating Land-Based Casinos, p. 1-20. Las Vegas, NV:

UNLV Gaming Press, 2014. The discussion also relies on relevant material from D. Walker,

Casinonomics. New York: Springer, 2013.

2 This includes commercial and tribal/First Nations casinos, as well as racinos. A list of Canadian casinos

by province can be found at https://abgamblinginstitute.ca/resources/reference-sources/canada-casinos.

The U.S. casino count is from State of the States: 2013 AGA Survey of Casino Entertainment, p. 4.

3 Richard (2010) found that unemployment helped to explain international casino adoption, but fiscal

stress, tourism and income levels were not significant in explaining legalization.

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continued expansion of the industry suggests that politicians view the employment, tax, and economic development benefits of casinos to outweigh the related costs. The state of research on the various social and economic benefits and costs is discussed in this review. Presented in the sections below are general studies that examine a variety of issues, followed by studies that are organized into economic impacts and social impacts.

METHODOLOGY

The papers were chosen for review based on their relevance to the general topics that have been identified as relevant to the socioeconomic impacts of gambling in North America. The literature can be traced from 1999’s Pathological Gambling, through the related discussions at the 2000 Whistler Symposium, and the 2006 AGRI conference in Banff. Several other sources, including Grinols (2004) and Walker (2007, 2013) provide a general picture of the relevant issues. Studies discussed herein were included based on their relevance and the inclusion and quality of their empirical work. The overall literature on gambling impacts is rather extensive, with much of it being listed and briefly reviewed by Williams, Rehm, and Stevens (2011).

RESEARCH QUALITY ASSESSMENT

Prior to beginning this project, it was anticipated that a Cochrane-type review would be conducted of relevant research studies, using guidelines from the Cochrane Reviewers’ Handbook (Higgins & Green, 2011) and the Centre for Reviews and Dissemination Guidelines (Centre for Reviews and Dissemination, 2008). Those guidelines suggest that research quality can be assessed by examining one and five-year impact factor (of the journal in which the article was published), overall number of citations, clarity of hypotheses and aims, control groups/regions, sample size, power, timeframe in which impacts were examined (i.e. longer periods of time are more desirable), sophistication of data analyses, weight and generalizability of findings.

A majority of the journals in this area are not indexed in the Web of Science, which is published by Thomson Reuters. Selection criteria for Web of Science is a highly formulaic and essentially subjective process, taking into account a number of factors including the number of citations per article, number of issues published per year, editorial content, international appeal (full criteria available here: http://wokinfo.com/essays/journal-selection-process/). Only 10% to 12% of journals meet these criteria. Gambling-related journals are not individually indexed; rather, those journals that meet criteria are ranked within “Addictions”, a category consisting predominantly of medical and psychology journals focused on substance abuse. The few journals that are ranked within the addictions category – which are the top ranked journals in gambling – have low impact factors relative to other addiction journals, because of the niche aspect of gambling. Alternatively, Google Scholar attempts to index all known citations for all journal articles. However, Google Scholar includes the grey literature

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(documents published by government, academics and industry without the peer-review requirements of a scientific journal) and does not provide impact factors or rankings of journals in particular fields. In addition, citations are a useful but imperfect measure of the impact of a research study. For example, early work in a field of study may be cited more frequently, unrelated to quality.

A majority of the literature cited in this paper appears in highly specialized “niche” peer- reviewed journals that appeal to a target audience in gambling economics and law, but not to the larger field of gambling studies or much larger field of addictions. Therefore, any attempt to critique articles based on ranking, impact, or citations would be misleading because it might inappropriately diminish investigations that are unranked or have few citations relative to articles that reach a broader audience. For this reason, this report will provide critiques within the body of the paper. These critiques take into account methodology, sample size, generalizability, measurement and sampling error, and other indicators commonly used to evaluate research. It should be noted that these same elements were considered in selecting articles for inclusion in this review.

GENERAL STUDIES

Several general studies examine a wide variety of the social and economic impacts of casinos. Many of these studies were written in the 1990s when there was little published empirical evidence on the economic and social impacts of gambling. The first attempt at summarizing those issues appeared in the Final Report of the National Gambling Impact Study Commission (1999), a highly politicized summary of Congressional inquiry that led to a very preliminary overview of issues and research. The Congressional process did, however, yield two substantive bodies of work that served to raise awareness about disordered gambling and its consequences: The National Prevalence Survey by the National Opinion Research Council (NORC, 1999) and the comprehensive survey book, Pathological Gambling: A Critical Review by the National Research Council (National Research Council, 1999; National Opinion Research Center, 1999). These works were the first in the U.S. to elucidate costs to individuals and summarize the existing literature in the social cost area, at a time when the research on economic and social impacts were in their infancy. Both of these studies reviewed the relevant literature at the time, but they are now fifteen years old and are considered outdated. Unfortunately, in some areas of economic and social impact research there have not been significant advances or updated studies since these 1999 reports.

Early research on the economic and social impacts of gambling was also highlighted in two Canadian conferences. The “Whistler Symposium”, held in Whistler, B.C. in September 2000, gathered many of the researchers who were examining the economic and social impact of casino gambling. Several papers based on the symposium were subsequently published in the Journal of Gambling Studies, volume 19, number 2, June 2003 (Collins & Lapsley, 2003; Eadington, 2003; Single, 2003; Walker, 2003; Wynne & Shaffer, 2003). Some of the issues

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addressed in these papers are discussed in subsequent sections of this report. In 2006, the Alberta Gambling Research Institute hosted its annual conference in Banff. Similar to the Whistler Symposium, this conference attracted leading researchers on the economic and social impact of casino gambling (Alberta Gambling Research Institute, 2006). Both Canadian conferences highlighted the intellectual tension in the field over how such economic and social issues should be defined and measured.

These early beginning publications and conferences generated interest in this area of research, and resulted in a number of new investigations and authored books on economic and social issues in gambling studies, which are referenced here4. The following sections review only the peer reviewed academic literature, which provide more focused analyses because of vetting and revision.

ECONOMIC IMPACTS

The most compelling incentives for the legalization and expansion of the casino industry are economic in nature. Casinos are promoted as job creators, catalysts for economic development, and perhaps, most importantly, new sources of tax revenues.

The two most powerful incentives for legalized casinos are job creation and tax revenue. The casino industry is service-driven, employing large numbers of full-time and part-time workers, often in jurisdictions that had formerly suffered from high rates of unemployment. In addition, the tax rates applied to gambling revenues are higher than rates on most goods and services. In many jurisdictions, casino taxes are even higher than the “lottery tax” associated with the state-sponsored lottery. The revenue retained by governments from lottery ticket sales is typically between 30% and 40%, but, in some jurisdictions gross casino revenues are taxed at 50% or more. From an economic perspective, however, the key measure of a casinos’ impact is their net benefits relative to a situation in which casinos do not exist5. For example, if a city opts to allow a casino to be built instead of a new shopping mall, then the economic impact of the casino should be measured relative to the economic impact that the mall would have had, if it had been built instead. The measurement of this counterfactual is certainly difficult in

4 On the United States, see Grinols (2004) and Walker (2013). On Canada see Anielski Management

Inc. (2008); Humphreys, Soebbing, Wynne, Turvey, and Lee (2011); and Williams, Rehm, and Stevens

(2011). Comprehensive studies have also been conducted in Australia and the United Kingdom. The

Australian Productivity Commission (1999) report was notable; an updated report was published in 2010,

and can be found at http://www.pc.gov.au/inquiries/completed/gambling-2009.

5 This point is argued by economists on different sides of the casino debate. For example, Grinols (2004,

chapter 4) and Walker (2013, p. 11).

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practice. Nevertheless, researchers have developed a variety of methodologies for isolating the economic impacts of gambling.

This section examines key economic impacts that are typically attributed to legalized casinos, and highlights findings from key studies. In addition to extensive review of the literature regarding employment and tax revenue, this section also examines the state of evidence with respect to economic growth, inter-industry relationships, and market saturation.

EMPLOYMENT

One expected economic benefit of legalized casinos is an increase in the number of jobs and higher wages. The casino industry makes an effort to publicize the number of people they employ in each jurisdiction. For example, data published annually in the American Gaming Association’s State of the States survey suggest that the industry has a significant impact on the state and municipal employment picture (American Gaming Association, 2014)6. In Canada, the gaming industry is significantly smaller and is either wholly or partially run by the government, resulting in reduced emphasis on contributions to regional economies.

Aside from this industry-sponsored data, surprisingly few studies have focused on the employment effects of casinos. The net employment effect of casinos depends in some measure on the degree to which casinos “cannibalize” other industries. That is, to the extent that casinos cause other firms or industries to shrink; for example through direct competition, the positive employment effect of casinos diminishes. Conversely, in rural and other areas with historically high levels of unemployment, the opening of a casino will have a more positive employment effect. Overall, the empirical evidence reviewed below suggests that casinos have at least a modest, short-term, positive employment effect, and that the wage impact of casinos appears negligible. Analyses in these areas, however, are hampered by limitations, including the inability to quantify labor drawn from outside the local area if employees fail to relocate, and the difficulty in accounting for highly variable employment in metropolitan areas where the casino industry may be one of a multitude of employers.

A brief summary of several of the leading studies in this area provide context for the general conclusions stated above. A study by Hashimoto and Fenich (2003) examined county-level changes in employment, the number of establishments, and annual payroll in several counties in Mississippi. This study found that the introduction of casinos led to an increase in all three variables, raising questions about the substitution effect of casinos in Mississippi. These results do not account for the restaurants offered on casino properties, which would further increase the positive economic impact of casinos on local employment. It is important to note,

6 The American Gaming Association is a political organization that represents the U.S. casino industry.

The AGA stopped publishing its State of the States in 2014.

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however, that Mississippi has characteristically suffered from high rates of unemployment and a stagnant economy, so the introduction of casinos in more prosperous states could yield different findings. Furthermore, as this study is limited to select counties in Mississippi, one cannot assume the same results would be found elsewhere within the state or in other states.

Another study examined rural casino counties in four states (Mississippi, Illinois, Iowa and Missouri). Garrett (2004) used monthly household employment data before and after the introduction of casinos to explore the effect of casinos on resident employment in each county, and then used pre- and post- annual payroll employment data to detect employment changes in specific industries. He found that three of the four counties experienced increases in both household and payroll employment that were not forecasted absent the casino. This study is notable because Garrett used comprehensive data, and the researcher has a solid record of quality research. However, as with other studies of this type, the results found in the jurisdictions studied cannot necessarily be assumed to apply elsewhere. As more pieces of evidence from different jurisdictions are published, however, they begin to paint a general picture of how casinos affect their local economies.

Certainly the most comprehensive study to date on the employment effects of casinos is a study by Cotti (2008). Cotti’s economic analysis estimates county-level impacts for all industries, as well as for the entertainment/hospitality sector, and provides a general picture of the employment effect of casinos in the United States. Overall, the researcher found that “casino introduction increases aggregate employment in host communities relative to counties without a casino” (p.18). Most of the benefits, however, accrue to the entertainment sector, with the strongest impacts found in low-population counties; large population counties see little impact from the introduction of casinos

Cotti’s analysis is the most in-depth to date because it analyzes county employment data in all U.S. counties to determine the effect of the existence of a casino in the county. Cotti’s general results are summarized in Table 1.1 below. This table shows the employment effect and the earnings effect at the county-level. The labor market is presented in aggregate, as well as by entertainment and hospitality sector.

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Table 1.1. Estimated county-level effect of casinos (from Cotti, 2008).

Sector Employment Effect Earnings Effect

All industries +8.2% +0.79%

Entertainment (NAICS 71) +50.5% +19.1%

Hospitality (NAICS 72) -1.55% +3.47%

Weighted average of entertainment and hospitality sectors

+7.52% +6.16%

As shown in Table 1.1, there is a modest 8.2% employment effect when considering all industries in casino counties relative to non-casino counties. The entertainment industry sees a large positive employment effect, as a casino will often represent a large proportion of the entertainment sector for the average county.

Partitioning counties by population count yields very different results. Tables 1.2 and 1.3 show the results in the top third and bottom third most populated U.S. counties.

Table 1.2. Estimated county-level effect of casinos: Top-third-population counties (from Cotti, 2008).

Sector Employment Effect Earnings Effect

All industries +0.28% -0.12%

Entertainment (NAICS 71) +17.6% +7.89%

Hospitality (NAICS 72) +0.65% +1.1%

Weighted average of entertainment and hospitality sectors

+3.61% +2.28%

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Table 1.3. Estimated county-level effect of casinos: Bottom-third-population counties (from Cotti, 2008).

Sector Employment Effect Earnings Effect

All industries +10.5% +1.84%

Entertainment (NAICS 71) +28.7% +6.74%

Hospitality (NAICS 72) +3.1% +4.59%

Weighted average of entertainment and hospitality sectors

+7.56% +4.96%

These tables demonstrate that the estimated impact of casinos on employment and earnings are much greater in smaller (i.e. less populated) counties. A particular casino will represent a larger component of the local labor market in a small county relative to a larger county. The implication of this finding is that casinos in urban markets are likely to have an insignificant impact on employment statistically, but casinos in rural areas are more likely to impact the local labor market, despite similar rates of employment.

Cotti’s analysis provides strong evidence that casinos have at least a modestly positive impact on the local labor market, and raises doubt about the validity of the “substitution effect” argument against casinos, as least with respect to employment impacts. The Cotti study is, to date, the best study to examine the local employment effects of casinos, primarily because it uses county-level evidence and exhaustive empirical analysis.

Despite its general quality, one limitation of the Cotti analysis is that the data do not account for number or sizes of casinos. This means that a small single casino is treated the same in the analysis as a cluster of large casinos; the analysis focuses solely on the existence of a casino in the county during a particular quarter (Spectrum Gaming Group, 2013). Another limitation is that the data used in the Cotti study are aging. His data series ran from 1990 to 1996, meaning that the conclusions noted above are based on data that are almost 20 years old. As the employment and wage effects of casinos change over time, it is unfortunate that there have not been more recent, comprehensive studies of the employment and wage impacts of casinos at a county-level in the United States.

In a study of the Canadian casino industry, Humphreys and Marchand found that a new casino opening leads to higher casino industry employment, as well as to positive employment spillovers in the local hospitality and entertainment industries (Humphreys & Marchand, 2013).

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These results are similar to those found by Cotti in the United States. Humphreys and Marchand warn:

The evidence…suggests that a skeptical approach be taken regarding the use of employment and earnings gains to justify the legalization or expansion of casino gambling within a locality. Any expectations of new jobs or earnings enhancement should be considered short-term and narrowly focused within the gambling and hospitality industries. Broad employment and earnings gains in other local industries outside of gambling and hospitality should not be expected. (p. 159)

This is arguably the highest quality study examining Canadian data. However, as with other similar economic studies, the Humphreys and Marchand results apply only to those jurisdictions studied, and the results may differ in different jurisdictions and over different time periods. Similar to the Cotti study detailed above, the Humphreys and Marchand data are also somewhat dated – ending in 2005.

Evidence from both the U.S. and Canadian studies suggests that casinos have little or no impact on local wages at an aggregate level. However, as presented in the tables above, expansion in the casino industry can be a catalyst for minor increases in wage rates in the entertainment and hospitality industries. This is, perhaps, not surprising, given that a new casino is likely to cause a large increase in the demand for labor within that narrow industry, but not in the local labor market overall.

Taken together, the studies on the employment and wage impacts of casinos suggest that casinos do, in fact, provide at least a modest and short-term positive impact on employment and, to some extent, wages in the hospitality and entertainment industries. However, these conclusions are based on aging data.

TAX REVENUES

Politicians in many jurisdictions view a key economic benefit of casinos to be the tax revenues they generate. This is because in most jurisdictions, such as U.S. states, the government is able to set the tax rates that are applied to casino revenues. Such tax rates are often set at rates that are much higher than general sales taxes. While casinos can have a significant impact on local and regional government budgets, the overall tax impacts are unlikely to be as great as the industry may suggest.

Although casinos are usually taxed at relatively high rates, the revenue they generate may not result in a net increase of state tax receipts. For example, spending at casinos may result in a large substitution effect, or spending being diverted away from other goods and services, resulting in an uncertain net tax effect of casinos. It is conceivable that casinos could actually reduce state government tax revenues, although this result is unlikely in most jurisdictions.

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Given that tax revenues are the key motivation for casino legalization, it is remarkable that this is one of the least researched economic impacts of casinos, with only a handful of published studies. Siegel and Anders (1999) examine how Missouri county sales tax revenues were impacted by riverboat casinos in the state. Studying data from1994 to 1996, they report that a 10% increase in gambling tax revenue leads to a 4% decrease in taxes on other amusement and recreation sources. Another study, by Borg et al., found that $1 in lottery revenue has a cost of 15-23¢ in other types of government revenue (Borg, Mason, & Shapiro, 1993). Published in 1993, this study represents one of the oldest in the literature on the tax effects of casinos. However, the substitution effect across tax types is unlikely to change fundamentally, meaning that this limitation is not as serious as it might first appear.

A recent, comprehensive analysis of casinos on aggregate tax revenues suggests that casinos might actually have a mildly negative impact on state tax receipts (Walker & Jackson, 2011). However, the net tax effects of casinos are likely positive, once the positive impacts of casinos such as increased per capita income and hotel employees (a proxy for tourism) are accounted for (Walker, 2013). As with various other studies on the economic impacts of casinos, the data used in the Walker and Jackson study are somewhat dated, running from 1985 through 2000. Since casino development has been significant since 2000, an update to this analysis would be helpful to better understand the tax impact of casinos. Another possible limitation of the Walker and Jackson results is that they use a very complicated model of cross-sectional and time series data. The results of such an analysis can be extremely sensitive to the modelling technique. Therefore, one should not place too much weight on a single study of this type until other analyses confirm the results. Whether or not casinos represent a large component of overall tax revenues, they may still fulfill the important political purpose of reducing pressure to raise other taxes or to reduce government expenditures. Therefore, there is almost certainly a net positive impact from casinos with respect to a state’s fiscal status. However, the evidence of this impact is rather thin.

ECONOMIC GROWTH7

The evidence reviewed above suggests that casinos likely have a positive impact on employment, wages, and tax revenues, but these impacts may be relatively minor and short-lived. A more general question to consider is whether casinos can help to promote the general economic welfare, as measured by economic growth (or increasing personal incomes). It might be expected that any negative casino labor substitution effects or industry cannibalization effects would ultimately negatively affect a regional economy’s rate of growth. Yet, few studies have addressed this issue directly. Indeed, despite commercial and tribal casinos expanding to almost every state in the United States over the past two decades, few

7 This section is based on Walker and Jackson (2013).

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studies have attempted to analyze whether or not casinos have a net impact on the regional or state economy.

The economic growth issue is addressed in a series of papers by Walker and Jackson (this analysis is discussed and expanded upon by Walker (2013). The authors tested the statistical relationship between casino revenues and economic growth; the analyses and conclusions are summarized here, omitting technical details. The analysis relies on a statistical test called “Granger causality”. This test examines how two data series move together to determine whether one series can help to predict future values of the other variable. If past values of casino revenue, for example, help to predict future values of economic growth, then casino revenue “Granger causes” economic growth. Although this does not mean literally that the one variable “causes” the other in statistical terms, it is as close as we can come in economic statistical analysis to approximate causality.

In their most recent paper, Walker and Jackson use the data from 1990 to 2010 of 12 states: those states that had riverboat or land-based commercial casinos during the sample period (Colorado, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri, Nevada, New Jersey, Pennsylvania and South Dakota). Thus, the study included 252 observations (i.e. 12 states, 21 years). The data used include inflation-adjusted annual data on each of the above- listed casino states’ per capita incomes and net casino revenues. The findings of the analyses are that casino revenues Granger cause per capita income. However, there was no evidence that per capita income Granger causes casino revenues. Thus, it can be concluded that casinos do have a positive impact on state-level economic growth, at least for the states tested and during their sample period. What the analysis does not allow one to do is determine exactly the magnitude of the positive impact of casinos on state-level economic growth.

There are two main limitations to this type of analysis. First, as noted above, Granger causality does not prove “causality” in the common sense of the word. Second, the modeling does not isolate other factors that could potentially have impacted economic growth; there could be many of these at the state-level.

Nevertheless, it is important to note that the fundamental economic benefit from the development of an industry comes from mutually beneficial voluntary exchange. The benefits that accrue to the parties of such market transactions are fundamental to the process of economic growth. However, the consumer benefits that come from the existence of the casino industry are typically ignored in political and academic debates over casinos. There have been some academic discussions of the consumer benefits from spending at casinos, called “consumer surplus”, but acknowledgement of this economic benefit from casino gambling is

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rare8. Psychologists have recently begun discussing the potential benefits from so-called “positive play” or non-problematic gambling (Wood & Griffiths, 2014).

It is likely that measurable impacts – such as employment and tax effects – are more likely to be touted by politicians pushing for casino expansion than the more aggregate and abstract “economic growth” or “consumer benefits”. Nevertheless, the economic growth effect is an important piece of the puzzle. The limited evidence that does exist suggests that the casino industry may be a catalyst for regional economic growth. This is consistent with economic theory, which suggests that the expansion of any industry that satisfies consumers’ demands would make a contribution to economic growth.

INTER-INDUSTRY RELATIONSHIPS

The beginning of this section discussed the net impacts of casinos as being the most relevant. Evidence suggests that casinos tend to increase net employment, at least at the county level. Nevertheless, the industry may negatively impact some other industries, and policymakers are often interested in which types of industries are likely to be harmed as a result of casino expansion. As with other areas for economic evaluation, there have been few investigations on the inter-industry impact of casinos. Several studies have examined the relationships between casinos and other gambling industries in particular markets. Most of the evidence suggests that casinos and lotteries are substitutes, and that these forms of gambling harm one another’s revenues (Anders, Siegel, & Yacoub, 1998; Elliott & Navin, 2002; Kearney, 2005; Mobilia, 1992; Popp & Stehwien, 2002; Ray, 2001; Siegel & Anders, 2001). However, the results are not conclusive, and one comprehensive U.S. study has found that certain types of gambling are complementary (Walker & Jackson, 2008). For example, horse racing gambling revenues and casino revenues have been found to be complements, but this may stem from the development of racinos.

Unfortunately, this area of research is not very current, and the findings rely on relatively old data. Most of the studies that have examined inter-industry relationships use data from the 1990s, before the recent proliferation of gambling in North America. As with other economic impacts, the relationships among industry revenues could have developed and changed during the past 15 years. Nevertheless, one consistent finding has been that casinos will have a small negative impact on lottery sales (Walker & Cummings, 2015)9.

8 Studies that have attempted estimates of consumer surplus include Crane (2006) and the Australian

Productivity Commission (1999). The theory of consumer benefits from gambling is discussed by Walker

(2013, chapter 3)

9 Walker and Cummings (2015) found that casinos in Maryland have had a negative impact on the

state’s lottery sales, approximately 5%.

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There is even less research on the relationship of non-gambling leisure industries to the gambling industry. One study examined the effect of casinos on retail property values and found no negative overall impact, though a few tourism-related industries (i.e. service stations, restaurants) saw positive property price effects attributable to casinos (Wiley & Walker, 2011). Another study examined the impact of casinos on residential property values, and found that casinos have a modest (only 2%) positive impact on housing prices, but only for houses in the same area as a casino; housing prices in bordering areas were higher, by about 6%. However, most of the impacts were seen in areas surrounding tribal casinos, where property values may be more likely to be depressed (Wenz, 2007). In a study conducted in Windsor, Ontario, it was discovered that when the effect of crime is considered, the net impact of casinos on property values may be negative (Phipps, 2004).

A key limitation of the studies on property values is that the results apply only to the markets and the time periods studied; again, the results cannot be generalized. However, as multiple studies offer similar conclusions, we can begin to develop some confidence that there is a general expected effect of casinos on property prices. Unfortunately, this area of research is not developed well enough to have strong conclusions.

Despite much political debate over whether casinos “cannibalize” other industries, the limited available evidence from the academic literature suggests that this is not the case, and that casinos tend to have a net positive impact on their local economies, as measured by property values. However, there is evidence that casinos may negatively impact other forms of gambling, particularly lotteries, and it is difficult to account in these analyses for lost revenue from prospective business or other variables that are difficult to quantify.

MARKET SATURATION

During the past few years there has been increasing concern, particularly among politicians in the northeast United States, that the casino industry is becoming “saturated.” The primary example of this is in Atlantic City, where four of the twelve casinos closed during 2014. Although there has yet to be a clear definition of exactly what this means, saturation loosely means that there are too many casinos for the market. Various stakeholders may adopt differing perspectives; for example, casino patrons may not think a market is saturated until there is more than one casino within a 15-minute drive from their house. Politicians may view market saturation to mean that a new casino opening does not increase overall casino tax revenues. The casino industry might define saturation as the point at which a new casino causes any decline in existing casinos’ revenues. Or it might simply be the point at which consumer spending at casinos reaches its maximum, regardless of new or additional supply of casino capacity. This is an area in which there has been very limited academic research. Only two studies have focused on this issue, and both examine the impact of new casinos in the Northeast U.S (Condliffe, 2012; McGowan, 2009). These papers focused on whether the introduction of casinos in Pennsylvania led to an increase or decrease in regional aggregate

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casinos revenues. Findings from the studies were in conflict and used simplistic empirical analyses, limiting both the impact and generalizability of the results. Thus, there is little evidence on which to base any conclusions regarding market saturation in the northeast U.S., or in any other regional market. This is one of the most seriously neglected areas of research on the economic impact of gambling.

SUMMARY OF ECONOMIC IMPACTS

It is surprising that there has not been more extensive analysis of the economic impacts of the casino industry in North America, given the degree to which the industry has expanded over the past 25 years. Nevertheless, based on the available literature, it can safely be concluded that casinos have been shown to have at least a short-term and modestly positive economic impact on employment and economic growth in some jurisdictions. The wage effect has been negligible.

Although casinos have been shown to have a negative impact on lottery revenues, the addition of casinos will likely lead to a net increase in government revenues from gambling taxes. The casino industry continues to expand, and there has been increasing concern, particularly in the northeast United States, that the industry is reaching a saturation point. However, there is little evidence to date to suggest that this situation is actually taking place. Overall, the casino industry continues to grow, more so in the United States than in Canada, with evidence of modestly positive impacts and very little empirical evidence of negative impacts.

SOCIAL IMPACTS

Given the expansion of the casino industry, particularly in the United States, it appears that many policymakers are convinced that casinos provide benefits in excess of their costs. Many of the costs attributable to casinos take the form of negative social impacts, many of which are difficult or impossible to measure. This has made the comparison of costs and benefits from casinos a difficult endeavor, to say the least. Indeed, the two Canadian conferences mentioned in the previous section (the Whistler Symposium in 2000 and the AGRI conference in Banff in 2006) focused primarily on the “social costs” or negative social impacts that many researchers and policymakers attribute to the casino industry.

QUALITY OF LIFE

The impact of casinos on “quality of life” is a very general topic. On the one hand, the availability of casino gambling can be beneficial to consumers who enjoy gambling. At the same time, some studies have shown that casinos have tended to have a modestly positive impact on property values, raising doubt that there is any significant “cannibalization” impact,

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as has been claimed by casino opponents. These issues were addressed previously in this review.

Whether casinos impact residents in the immediate area of casinos is a different question, however. For example, many people are likely to have NIMBY (not in my back yard) concerns about casinos. While many people might accept casino gambling being legal, this does not mean they would like to have a casino in their own neighborhood.

One study that has addressed this concern is by Wenz (2008). Wenz studied casino communities in the United States, and found that casinos had no net impact on quality of life in their host communities. However, he did find that Indian casinos generated additional economic activity, including increased employment and housing starts. Two other studies examine the views of community members on the impact of casinos. Giacopassi et al. utilized interviews with community leaders to gauge the perceived impacts of casinos on communities (Giacopassi, Nichols, & Stitt, 1999). A majority of 59% of interviewees indicated that casinos enhanced quality of life in their communities; and 77% indicated casinos had helped the local economy. However, since the interviewees were not selected randomly, one could argue that the results are likely to be biased. In another study of perceptions, casino community residents were found to over-estimate the negative impacts of casinos on crime and delinquency (Giacopassi, Stitt, & Nichols, 2001).

A further study on quality of life was conducted by Nichols et al. (Nichols, Stitt, & Giacopassi, 2002). These authors found a rather neutral perceived impact of casinos, with a positive perception on economic impacts, but a negative perception about casinos and crime. One Canadian study that focused on the impact of casino gambling in Windsor, Ontario, found similarly mild casino effects on quality of life (Phipps, 2004). The results from the limited studies that are available suggest that residents’ perceptions of the impact of casinos are mixed. The most rigorous study, however, has suggested that casinos have a slightly positive impact on quality of life. As in other areas of research, there are limitations to these studies. Most studies have not been replicated, and it may very well be the case that the conclusions apply only to those jurisdictions and time periods analyzed. As this area of research is relatively young, firm conclusions cannot be formed regarding the impact of casinos on quality-of-life. The issues of crime, divorce, and other negative social impacts from casinos can be considered to be components of quality of life. Some of these issues are addressed in the following sections.

CASINOS AND CRIME

A majority of research in the area of social impacts focuses on those caused by problem and disordered gambling. For definitional purposes, the term “problem” gambling has been used interchangeably with “compulsive”, “at-risk”, and other terms to denote gamblers who exhibit subthreshold clinical symptoms. In contrast, “disordered” gamblers (or the older term

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“pathological”) refer to those who meet the clinical criteria for gambling disorder in the Diagnostic and Statistical Manual of Mental Disorders by the American Psychiatric Association (American Psychiatric Association, 2013). Among all of the social ills attributed to casinos, crime has perhaps been analyzed the most in the literature. There are several different theories suggesting that there may be a link between casinos and crime. First, there is evidence that individuals who are more likely to be diagnosed with a gambling disorder are more likely to have committed a crime (Clark & Walker, 2009). However, this evidence does not point specifically to casino gambling as being linked to criminal activity. Nevertheless, it makes sense that problem gamblers may have a higher propensity to commit crimes, simply because they are more likely to develop financial problems than non-problem gamblers.

Casinos may also create crime simply because they attract a large number of patrons, most of whom carry cash. Thus, a casino may be seen by some as an ideal target. In their study of casinos and crime, Grinols and Mustard list a variety of factors through which casinos might affect crime (Grinols & Mustard, 2006). They suggest that casinos could reduce crime through a wage effect (if casinos increase local wages, the incentive to commit crimes falls) or a development effect (if casinos contribute to economic growth, streets are safer and there may be less crime). The authors list five channels through which casinos might increase crime:

• Development (casinos could have a negative development effect and attract criminals, thus draining the local economy)

• Higher incentive to commit crime (casinos attract patrons with cash)

• Pathological gambling

• Visitor criminality (casinos may attract patrons who are more prone to commit and be victims of crime)

• Changes in population composition (casinos increase proportion of unskilled workers, who may be more likely to engage in crime)

In the criminology literature there are also several theories of crime that would seem to apply to casinos. These include the “routine activities” and “hot spot” theories of crime. Both theories can be applied to casinos since casinos may be places that attract both potential victims and thieves (Cohen & Felson, 1979; Barthe & Stitt, 2007).

One serious, unintended consequence of gambling is the inevitable financial and legal harm that results from mounting debts and limited options caused by excessive gambling (National Opinion Research Center, 1999; National Research Council, 1999). In an effort to stave off creditors, fuel play, and hide gambling from loved ones, gamblers amass large amounts of debt, and may begin writing bad checks, stealing, embezzling from employers, and declaring bankruptcy (for a detailed exploration of these issues, see Nower & Blaszczynski, 2013; Nower & Caler, 2015). The commission of criminal acts typically leads to discovery, as

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gamblers face possible arrest or incarceration. This section will review the social impact of legal and criminal consequences of disordered gambling behavior.

Despite these assertions, research has yet to establish a causal link between casinos and crime, and studies have reported inconsistent or contradictory findings largely due to differences in variable operationalization and methodology (Miller & Schwartz, 1998; Stitt, Nichols, & Giacopassi, 2003). For example, Wheeler et al. (2008) found that higher gambling expenditures predicted higher levels of income-generating but not non-income-generating crimes; however, the influence of gambling was small compared to other variables such as police strength, the number of alcohol venues in the area, and the proportion of males in the population. Another study reported that, both before and after legalization, casino counties had consistently higher crime rates than other counties in the state; this could suggest that distressed jurisdictions are more amenable to the economic incentives offered by casinos, but the benefits do not necessarily affect crime rates (Koo, Rosentraub, & Horn, 2007). It could also suggest, as theorized by Stitt et al. (2003), that the method of statistical analysis can guide whether crime rates appear to increase, decrease or remain stable.

Economists Grinols and Mustard suggest that conflicting findings may be due to a number of factors, such as the failure to examine the inter-temporal effect of casinos or to control for variables that affect crime, reaching conclusions without actually examining crime rates, and/or bad science that tailor the methods to the political agenda of the sponsor. In their analyses of crime rates in casino and non-casino jurisdictions over two decades, the researchers concluded that casinos have no effect on crime upon opening; however, they ultimately account for 8% of crime, costing the county $75 per adult a year, primarily because casinos drain resources, lead to increased crime payoff and more crime or increased rates of pathological gambling and resulting offenses, attract criminals to the regions, and/or change the local population (Grinols & Mustard, 2006).

This position incited intellectual debate between Grinols, Mustard and Walker, who criticize the researchers for using flawed or insufficient data, introducing self-selection bias in the sample, and misinterpreting results (Walker, 2008a). Several exchanges in the literature followed without resolution (Grinols & Mustard, 2008a, 2008b; Walker, 2008a, 2008b), suggesting that even experts in gambling economics can reach different empirically derived conclusions depending on methodology. Reece (2010) attempted to resolve the debate by measuring casino activity, turnstile counts, number of hotel rooms and other variables to more accurately examine effects and also truncated the crime data sample to address the limitations suggested by Walker (2008a). He found that increased casino activity reduced crime rates except for burglary, which rose after a time lag. Determining the relationship between casinos and crime, if possible, will necessitate a comprehensive, critical evaluation of research methods and the development of a unified, rigorous framework for analysis that

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incorporates important control variables and relies on primary data collection or comprehensive data sets (for a review of this issue, see Walker, 2010).

GAMBLING DISORDER AND CRIME

A number of studies have found a significant relationship between crime and disordered gambling (Blaszczynski & McConaghy, 1994; Folino & Abait, 2009; Meyer & Fabian, 2005; Potenza, Steinberg, McLaughlin, Rounsaville, & O’Malley, 2000; Turner, Preston, Saunders, McAvoy, & Jain, 2007). For example, in a national survey of gambling in the U.S., more than 30% of disordered gamblers and 36% of sub-clinical problem gamblers reported arrests, compared to approximately 12% of low-risk and 5% of non-gamblers (National Opinion Research Center, 1999). The researchers estimated the arrests cost the criminal justice system an estimated $2,000 for each gambler who went to jail: 31% of the disordered and problem gamblers, compared to just over 4% of low-risk and non-gamblers. These rates are consistent with findings in other studies (see [Australia] Blaszczysni & Mcconaghy, 1994; [Argentina] Folino & Abait, 2009; [Germany] Meyer & Fabian; 2005; [Canada] Turner et al., 2007) and in a variety of settings, including treatment populations (Ledgerwood, Weinstock, Morasco, & Petry, 2007), Gamblers Anonymous (Abait & Folino, 2008), and hotline callers (Potenza, Steinberg, McLaughlin, Rounsaville, & O’Malley, 2000). In one study, Abbott et al. (2005) reported that about 20% of newly-sentenced inmates claimed their crime was gambling-related, 21% met the criteria for a gambling disorder at the time of assessment and 16% met clinical criteria in the six months before going to prison (Abbott, McKenna, & Giles, 2005).

High rates of gambling pathology have likewise been identified in prisoners, probationers and parolees (Templer, Kaiser, & Siscoe, 1993; Turner et al., 2007; Turner, Preston, Saunders, McAvoy, & Jain, 2009). One study reported that 34% of non-imprisoned participants who were on remand, probation or parole at the time of the study met criteria for disordered gambling, and that 38% met criteria for problem gambling (Lahn, 2005). About 25% of those surveyed endorsed gambling as a key contributor to their offense and nearly 50% of respondents reported obtaining money illegally to gamble (Lahn, 2005).

As intriguing as these studies appear, they are all hampered by similar methodological limitations that limit their generalizability and, to some extent, further confound our understanding of the relationship between gambling and crime (Nower & Caler, 2015). First, a majority of studies consist of retrospective self-report with a small, self-selected group of volunteer participants. Self-report is particularly susceptible to recall and social desirability biases, as the pool of respondents represents a fraction of all potential participants. Therefore, it is possible that those who choose to participate do so for motives unrelated to altruism: incentives, free time, ascribed status of being selected, curiosity, helpfulness etc. These factors may, in turn, lead some respondents to answer what they perceive to be the “right”

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way, to avoid providing truthful answers to questions they perceive as incendiary, or to answer questions when they do not really remember the answer.

Second, a majority of the studies failed to ascertain which offenses were motivated by the desire to generate funds for gambling or cover up the consequences of gambling and which were related to other causes including a penchant for antisocial and impulsive behavior. Third, none of the studies adequately controls for initiation of problem gambling in prison settings in order to differentiate among participants who committed gambling-related crimes, committed crimes and also gambled, and took up gambling in prison as a way to pass the time or earn rewards and then developed gambling problems.

Finally, few arrest, pre-sentence, probation, and other court reports and documents detail the reason the crime was committed; rather, reports typically state the nature of the offence and the evidence available for believing the defendant committed it. For this reason, there is no way to independently verify whether crimes are, in fact, gambling-related in the vast majority of cases. Taken together, studies on gambling and crime - while interesting to read, congruent with clinical experience, and often correlational - do little to establish a causal link between excessive gambling behavior and criminal activity. Future investigations will need to obtain large, representative research samples and to control for respondent bias, explore differences in gambling context and individual problem severity, and obtain independent corroboration of self- report. In addition, it is important that researchers in this area forge partnerships with public defense agencies, probation and parole officers, police departments, and medical examiners’ offices to include identification of offenses that were committed specifically to gain money for gambling purposes. In prison settings, pilot programs with intake and outcome evaluation components could better identify the prevalence of recreational and disordered gamblers, particularly with regard to etiology relative to incarceration, and the role of gambling in prisons.

While a substantial proportion of problem gamblers commit gambling-related crimes, a significant proportion commit crimes unrelated to their gambling (Blaszczynski, Steel, & McConaghy, 1997). This suggests that merely investigating gambling-related crimes may not provide a complete picture, because there are likely characteristics that differentiate subgroups of gamblers who have committed gambling-related crimes from one another. For example, it is likely that a large percentage of gamblers who are actually arrested or incarcerated would be classified as “antisocial-impulsivists” who engage in a multitude of maladaptive behaviors, including problem gambling (Blaszcyznski & Nower, 2002). However, Welte, Barnes & Hoffman (2004) have asserted that a single factor of general deviance failed to account for the relationship of gambling, substance use and other maladaptive behaviors in youth; rather, they concluded that there appear to be specific, uncorrelated antecedents predicting distinct subtypes of problem behaviors. Similarly, Wanner et al. (2009) examined cross-lagged links among gambling, substance use, theft and violence in two community

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samples from adolescence to young adulthood. Substance use was longitudinally linked to theft, violence, and substance abuse. However, gambling participation at Time 1 was linked only to gambling participation at Time 2, while gambling problems at Time 1 were linked to both gambling participation and gambling problems at Time 2; gambling problems were linked to theft only in adolescents with deviant peers (Wanner, Vitaro, Carbonneau, & Trembley, 2009). These findings underscore the need to carefully investigate a number of known and potential etiological factors, including genetic anomalies, neurobiological dysregulation, and personality variables that may interact with ecological, cognitive, and behavioral factors to lead to problem gambling in very different groups of individual gamblers (Blaszczynski & Nower, 2002; Nower & Caler, 2015).

To fully investigate the linkages between crime and disordered gambling, it is important to conduct additional research that clarifies a number of necessary distinctions. First, simply because a crime such as stealing or bad check writing can be related to gambling does not mean it is a gambling-related offense. Some individuals are bad money managers and others are thieves wholly apart from their gambling. Therefore, both researchers and clinicians would benefit from using a timeline follow-back approach to carefully detail any nature and history of illegal acts before and after the onset of disordered gambling. In addition, that assessment should include specific questions to determine the motivation behind crimes that were accompanied by gambling but not necessarily caused by gambling. It is also important to obtain a similar history of other addictive behaviors, including the relative influence of other factors (i.e. substance abuse, personality disorder) at the time of the commission of a crime to determine whether the behavior was related to gambling, substance abuse, or other underlying personality variables such as impulsivity and/or narcissistic self-entitlement. For example, many gamblers have alcohol problems, however, if an alcoholic disordered gambler embezzles from his company, the embezzlement may be due to the influence of alcohol or gambling exclusively, or to unrelated factors such as the desire to maintain an upper-class lifestyle. Therefore, it is clinically important to explore the motivations behind the crime as well as the totality of all contributing and confounding factors to identify whether there is, indeed, a likely link between gambling and the commission of the illegal act.

DEBT AND BANKRUPTCY

The main reason gamblers initiate gambling is to win money. As habitual, excessive gambling proceeds toward disorder, gamblers follow a typical trajectory of accumulating significant amounts of debt, which can range from $75,000 to $150,000 (or $1.20 for every dollar of annual income), filing for bankruptcy, and suffering personal and familial consequences such as divorce and suicide (Downs & Woolrych, 2009; Edwards, 2003; Ladouceur, Boisvert, Nower, & Blaszczynski, 2008; Pepin, Loranger, & Sylvain, 1994; National Opinion Research Center, 1999).

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Research has yet to establish definitively whether legalized gambling opportunities have led to overall increases in rates of personal bankruptcy, primarily because most governments fail to require debtors to detail precipitators of debt. Several studies have found statistical correlations between the introduction of casino gambling and overall increases in per-capita bankruptcy filings (Nichols, Stitt, & Giacopassi, 2000). For example, Nichols et al. (2000) reported that filings rose significantly in five of eight counties studied, however the analysis failed to control for unemployment rate, percentage of males in the population, and other variables that may significantly impact rates. Another study reported that bankruptcy filing in a gambler’s home state increased 10% following visits to casinos in other states in all but one state studied (Garrett & Nichols, 2006). Modeling the association of bankruptcy filing rates around casinos, Barron, Staten and Wilshusen (2002) reported that removing casinos would result in a 5% decrease in bankruptcy filing locally and a 1% decrease in the national bankruptcy rate.

Not all studies have found associations between bankruptcy and gambling. De la Vina and Bernstein (2002) found that unemployment rates were more closely related to bankruptcy filings than were casino openings, and another study by Thalheimer and Ali (2004) found that socio- demographic factors such as age, race, divorce and unemployment rates and the ratio of debt to disposable personal income were significant determinants of personal bankruptcies, but access to pari-mutuel or casino gambling was not.

Such conflicting research findings mirror the lack of consensus in court decisions regarding guidelines for treating gambling-related credit card debt. In general, courts consider a number of factors, including the length of time (pattern) between the charges and the filing of the bankruptcy, the number and amount of charges, and the financial condition and employment of the gambler at the time of the charges (see In re Doughterty, 1988; In re Troutman, 1994).

Social cost implications exist regardless of whether or not gamblers meet the discharge threshold. These social cost implications include the utilization of public assistance and services by destitute gamblers and their families, and the transfer of credit card debt to other customers and businesses in the form of fees and interest.

SOCIAL INEQUALITY

Some observers have raised the concern that gambling, and casino gambling in particular, may exacerbate the growing inequality in Western societies. This concern may be rooted in the well-established belief that lotteries tend to be “regressive” (Blalock, Just, & Simon, 2007; Clotfelter& Cook, 1991); that is, lower income individuals tend to spend disproportionately on lotteries (Blalock, Just, & Simon, 2009). Therefore, the revenues governments gain from their “lottery tax” tends to fall heavily on the poor. Most observers see this as a key disadvantage of using lotteries to finance governments. Casino opponents have also suggested that casino gambling is “regressive,” although no empirical support of this contention has ever been

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published. Indeed, one study found that the only type of gambling that appears to be regressive is the lottery (Freund & Morris, 2006).

Other research has suggested that a large proportion of casino revenues are gained disproportionately from individuals who have gambling problems (Williams & Wood, 2004). For example, Williams and Wood estimated that 23.1% of revenue in a survey of eight Canadian provinces was derived from problem gamblers; in Ontario alone, the proportion was 36% (Williams & Wood, 2007). Similarly, an examination based on the British Gambling Prevalence Survey estimated that problem gamblers account for 20% to 30% of days gambled and money spent gambling (Orford, Wardle, & Griffiths, 2013). These studies have several important limitations. The Canadian studies rely on self-reported data obtained from a random-digit dialing survey and a subgroup of volunteers who completed prospective diaries. Similarly, the British survey consists of a nationally representative sample of individuals who agreed to be interviewed and provided retrospective estimates of their gambling expenditures. Such surveys are limited to individuals with telephones who are willing to participate in surveys and are subject to recall and social desirability biases, among other limitations. Additional studies with large samples are needed; those studies should attempt to correlate objective player tracking data with gamblers’ self-reports and problem severity to verify reported expenditures on gambling in relation to gambling problem severity.

SOCIAL COSTS AND ESTIMATES

Most of the negative social impacts associated with casino gambling can be directly or indirectly linked to problem gambling. Social scientists have estimated that the prevalence rate of disordered gambling is somewhere between 0.4% and 2.0% of the general population (Petry, Stinson, & Grant, 2005). More research is needed on the degree to which gambling expansion affects the prevalence of disordered gambling (St-Pierre, Walker, Derevensky, & Gupta, 2014). As discussed in a previous section, because individuals with a gambling disorder often find themselves in a financial crisis, many of the problematic behaviors associated with disordered gambling relate to finances. The following is a list of items that are commonly discussed in studies on the social costs of gambling (Walker, 2013):

• Income lost from missed work

• Decreased productivity on the job

• Crime

• Depression and physical illness related to stress

• Increased suicide attempts

• Bailout costs

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• Unrecovered loans to pathological gamblers

• Unpaid debts and bankruptcies

• Higher insurance premiums resulting from pathological gambler-caused fraud

• Corruption of public officials

• Strain on public services

• Industry cannibalization

• Divorces caused by gambling

A large share of the academic literature on gambling focuses on the prevention, diagnosis, and treatment of gambling disorders. As a result, psychologists have quite a good understanding of the different types of problems often experienced by disordered gamblers and their families.

One important set of issues that defy research and estimation are the “moral” arguments against the expansion of casino gambling. Some people simply believe that government should not encourage, or even allow, gambling. Such arguments seem to be a lost cause, at least in the United States, since lotteries and casinos are now widespread. At the local level, however, voters have quite a bit of control and can successfully prevent a casino from being opened in their community. Such opposition is sometimes due to moral concerns, and sometimes it is due to a more general “not in my back yard” concern.

Monetary estimates. Political debates over casino expansion typically focus on the simple monetary measures of the impacts of casinos. One of the major challenges in the academic literature has been how to measure the magnitude of the social costs of gambling. Despite a variety of monetary estimates of social costs that appeared in the literature during the 1990s, researchers still have little understanding of the monetary value of the social costs of gambling. The research methodology for defining and measuring social costs has simply not been developed as well as the methodology on the benefits side of the equation (Walker, 2013; Walker & Barnett, 1999). As a result, social cost estimates of the above-listed negative impacts commonly attributed to casinos range anywhere from $2,000 to $50,000 per disordered gambler, per year. Obviously, such a large range is indicative of something wrong in how the costs are being measured10. Criticisms of the social cost literature date back to the 1990s, and are still valid today. For example, the National Research Council (1999) writes:

10 This is despite some attempts at comprehensive analysis, such as Anielski Management Inc. (2008)

and Humphreys et al. (2011).

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Most reported economic analysis in the literature is methodologically weak. In their most rudimentary form, such studies are little more than a crude accounting, bringing together readily available numbers from a variety of disparate sources… The consequence has been a plethora of studies with implicit but untested assumptions underlying the analysis that often are either unacknowledged by those performing the analysis, or likely to be misunderstood by those relying on the results. Not surprisingly, the findings of rudimentary economic impact analyses can be misused by those who are not aware of their limitations. (p. 162)

Addressing this area will necessitate a number of policy considerations. First, credit counseling agencies and bankruptcy courts should be encouraged to specifically identify debts that were incurred as a direct result of gambling and/or those that result from a lack of funds due to gambling expenditures and to refer those clients to gambling treatment services. All aspects of this process generate social costs which should be identified and evaluated. Also, credit laws fail to adequately protect spouses and legal partners of problem gamblers from debt occurred without their knowledge and, in some cases, can hold innocent spouses liable for expenditures on joint accounts and credit cards. Gamblers and their spouses, then, default on credit, loan, and mortgage responsibilities, which are then passed on to other consumers; it is important to discover these costs and factor them into the overall cost-benefit analysis of gambling opportunities.

In addition, different jurisdictions have adopted varying perspectives regarding the accessibility of funds through credit, check and ATM, in, or immediately surrounding, gambling venues. Efforts to compare gambling-related debt across jurisdictions, controlling for ease of accessibility, would also yield salient information regarding gambling costs to individuals. Obtaining a clear picture of the social costs of gambling will necessitate greater involvement of key institutions and gaming operators, and an infrastructure to assemble all the pieces into one coherent whole. In addition to the financial and legal costs, it will also be necessary to include costs of gambling treatment for the gambler and family, costs that result from health and mental health related issues that stem from the stress of problem gambling, as well as costs to other family members. Without all of this information, it is impossible to estimate accurately the social costs of problem and disordered gambling, and without better reporting from multiple sections, it is impossible to establish direct causality between gambling and these social costs.

CONCLUSIONS AND FUTURE DIRECTIONS

Research on the economic and social impacts of casino gambling has come a long way in the past 25 years, and early research was often published in the complete absence of data or empirical evidence. This might be expected given that the casino industry, outside of the State of Nevada and Atlantic City, New Jersey, was relatively new to North America as recently as the late 1980s.

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As casinos have continued to spread, there has been increasing interest in their economic and social impact. The available evidence suggests that, like any other industry, casinos can contribute to their host economies. Researchers have found that casinos can positively impact local employment, wages in entertainment and hospitality sectors, regional economic growth, and property values. However, there are also negative social impacts that can be attributed to the spread of casino gambling. These social costs may include increased criminal activity, bankruptcy filings, divorce, and suicide attempts. However, research on these negative impacts is still in its infancy, and no firm conclusions can be drawn. As a result, these represent key areas where researchers should focus future efforts.

Since the widespread introduction of casino gambling, technology has advanced dramatically, leading to an equally dramatic rise of online gambling. In addition to technological changes that have facilitated increased online gambling, legal changes have also been important catalysts. For example, in December 2011 the U.S. Justice Department released an opinion on the Wire Act that indicated that the Act applies only to sports gambling (Seitz, 2011). This opinion has created a shift in online gambling, and now several states have adopted regulations for online gambling; many more states will follow.

Little is known about how online gambling will affect bricks-and-mortar casinos. On the one hand, if people see online gambling as a suitable substitute for casino gambling, the expansion of online and social media gambling might harm casinos. However, it might reasonably be conceived that online gambling is a different product than gambling at a casino. Casino gambling is more of a social activity; online gambling is done in the privacy of one’s home. Perhaps, then, the two forms of gambling are complements rather than substitutes11. The limited research in this area suggests that online gambling provides an additional modality for those who have already begun to gamble excessively in other venues and serves to exacerbate problems due to the nature of anonymity and speed of play (Gainsbury, Russell, Hing, Wood, & Blaszczynski, 2013; Gainsbury, Russell, Wood, Hing, & Blaszczynski, 2015). Compared to casino gamblers, the typical Internet gambler is young, never married, employed full-time, educated, has a higher household income, and gambles in a number of formats but enjoys games of skill (Wood & Williams, 2011). The prevalence of problem gambling among online gamblers has been reported to be 3 to 4 times higher than among those who do not gamble online. Estimating social costs relative to benefits with this new form of gambling, then, may present additional challenges. Unlike land-based casinos, a majority of Internet gambling companies are headquartered outside North America and, therefore, contribute nothing to employment or the local economy save tax revenues. Based on preliminary findings, however, this medium is likely to entertain a larger proportion of problem gamblers who may lose jobs, time from work, collect unemployment, and otherwise generate the same

11 Philander (2011) and Philander and Fiedler (2012) examine the effect of online gambling and online

poker on the “offline” gambling market.

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or more social costs as casino gamblers. Online gambling does, however, hold promise for the study of gambling consequences, because play patterns, payment modalities, withdrawals, bonuses, and other factors can be tracked on a per play and per player level. For this reason, the increased legalization of online gambling should be accompanied by detailed reporting, which will allow researchers to identify patterns of escalating play and develop algorithms to inform harm reduction initiatives.

For both land-based and online gambling, measuring economic social costs is likely to remain a challenge. Even with multiple sources of information, larger representative samples, and sophisticated modeling techniques, it will still be difficult to estimate the “ripple effect” of gambling consequences on families, children, employers, insurers, and others who may incur financial, emotional, physical, and/or psychological impacts that remain hidden or undetected over time.

Finally, it is worth noting that changes in technology can and have had a major impact on the development of the gambling industry worldwide and its socioeconomic impacts. We have seen this in terms of changes to slot machines from “one arm bandits” to complicated server-based machines, which can play 100 lines at a time; live poker and online poker; and the most recent development, that of daily fantasy sports betting, which has exploded in popularity during the Fall of 2015 and is attracting the attention of regulators and legislators across the United States.

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