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The Income Elasticity of Casino Revenues: Short-Run and Long-Run Estimates

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Author Info
Mark W. Nichols () (Department of Economics, University of Nevada, Reno)
Mehmet Serkan Tosun () (University of Nevada, Reno)

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Abstract

In this paper we examine how casino gambling revenues differ from other major tax revenues in growth and variability. We estimate the long-run and short-run income elasticities using state-level casino revenue and state, regional and national income. Our empirical analysis includes eleven states that have significant casino gambling. To estimate income elasticities, we run separate time-series regressions for each of these states, controlling for supply-side industry effects. Our findings show that Nevada’s casino revenue base growth is more sensitive to national than state income, while such growth is more tied to state and regional income in riverboat states. Casino revenue base growth is generally faster than taxable sales, but slower than taxable income. Short-run (immediate) elasticity is, on average, lower than estimates for sales and income taxes, with an equal or more rapid adjustment to long-run equilibrium. These estimates also reveal greater variability when regional or national income changes are taken into consideration. This suggests that states that depend heavily on out-of-state visitors in their gambling operations may be more susceptible to changes in regional or national economic activity.

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File URL: http://www.business.unr.edu/econ/wp/papers/UNRECONWP07015.pdf
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File Function: First version, 2007
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Publisher Info
Paper provided by University of Nevada, Reno, Department of Economics & University of Nevada, Reno , Department of Resource Economics in its series Working Papers with number 07-015.

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Length: 30 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:unr:wpaper:07-015

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Related research
Keywords: Trade openness; Gambling revenues; Income elasticity;

Find related papers by JEL classification:
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August. [Downloadable!] (restricted)
  2. Suits, Daniel B, 1979. "The Elasticity of Demand for Gambling," The Quarterly Journal of Economics, MIT Press, vol. 93(1), pages 155-62, February. [Downloadable!] (restricted)
  3. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July. [Downloadable!] (restricted)
    Other versions:
  4. Thomas A. Garrett & Mark W. Nichols, 2005. "Do casinos export bankruptcy?," Working Papers 2005-019, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
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