The economic effects of casino gambling have been examined in a number of U.S. states and regions, and in other countries, by a number of authors.1 Despite the volume of studies on the effects of gambling, there is no consensus among researchers. This chapter focuses on different arguments related the economic growth effects of casino gambling.
A majority of gambling researchers during the past 15 years argue that expansion in the gambling industry has led to decreases in other industries, resulting in little overall economic stimulus.2 This argument appears to be particularly convincing to politicians and voters. In any case, there is a grain of truth to the argument but it is not as simple as suggested.
We examine these issues in detail in this chapter. There are four varieties of the argument that casino expansion comes at the expense of other industries, resulting in no net positive economic effect: The reader will notice the four ideas are close relatives, so the presentations of the different arguments and the responses overlap somewhat.
1 Many of the early studies on states in the U.S. are cited by Walker (1998a). Much more on Indian casinos can be found in Eadington (1990). For numerous testimonials by representatives from around the country, see U.S. House (1995). For a more recent comprehensive discussion, see Eadington (1999). 2 The potential social costs caused by pathological gambling (discussed in Chap. 6) are also important One of the most common arguments about legalized gambling is that any additional economic activity spurred by gambling comes at the expense of activity in other industries.
That is, the introduction of gambling merely shuffles spending among industries so any positive employment or income from gambling are offset by losses in existing industries that see lower sales volume and decreased employment.
This idea is typically referred to as “industry cannibalization” or the “substitution effect,” and is described by Gazel and Thompson (1996), Goodman (1994a, 1995b), Grinols (1994a, 1994b, 1995a, 2004), Grinols and Mustard (2001), Grinols and Omorov (1996), and Kindt (1994). For other discussions of the issue, see Eadington (1993, 1995a, 1995b, 1996), Evart (1995), Goodman (1994b), Rose (1995), and Walker and Jackson (2007a)