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Short and long run income elasticity of gambling tax bases: evidence from Italy

Author

Listed:
  • di Bella, Enrico
  • Gandullia, Luca
  • Leporatti, Lucia

Abstract

In periods of economic recession and budget constraints, it becomes essential for the governments to understand which tax revenues are more likely to guarantee a stable or increasing amount of revenues able to support the provision of main public services without depending too much on variation in Gross Domestic Product (GDP). The aim of this paper is to analyze a particular source of tax revenues in Italy, namely gambling tax revenue split by game type (i.e. Lotto; Lotteries; Entertainment machines), in order to understand how tax bases react to changes in income, providing a measure of short run (variability over the business cycle) and long run (growth) income elasticity of different gambling tax revenues. Results show that gambling activities tend to be impressively reactive to variation in income in the long run, and, on the contrary, not particularly volatile in the short run.

Suggested Citation

  • di Bella, Enrico & Gandullia, Luca & Leporatti, Lucia, 2014. "Short and long run income elasticity of gambling tax bases: evidence from Italy," MPRA Paper 73757, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:73757
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    File URL: https://mpra.ub.uni-muenchen.de/73757/1/MPRA_paper_73757.pdf
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    References listed on IDEAS

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    1. Kathryn Combs & Jaebeom Kim & John Spry, 2008. "The relative regressivity of seven lottery games," Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 35-39.
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    3. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 44(1), pages 55-66, March.
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    5. Julie Smith, 2000. "Gambling Taxation: Public Equity in the Gambling Business," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(2), pages 120-144.
    6. Dye, Richard F. & McGuire, Therese J., 1991. "Growth and Variability of State Individual Income and General Sales Taxes," National Tax Journal, National Tax Association, vol. 44(1), pages 55-66, March.
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    More about this item

    Keywords

    dynamic ordinary least squares; error correction models; excise taxation; gambling tax revenue; income elasticity of tax base.;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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