The Lure of Gambling

Abstract

Gambling, both in the casino-style and lottery forms, has risen to become a major component of the entertainment industry in the United States. State governments are the gatekeepers of this growing industry, holding the power to legalize and regulate all aspects of gambling. This thesis explores the rationale state governments have for legalizing gambling as well as the impact gambling tax revenues have for state budgets. The main focus is casino-style gambling, as casino-style gambling in particular is being pursued for expansion by numerous states in a variety of forms. As various forms of gambling are legalized throughout the country, a state's gambling interests begin to face competition from both neighboring states and other forms of gambling within the state. Econometric models attempted to predict the tax revenues a state can obtain from legalized gambling based on such competition and a states own demographics. The results support a first-mover advantage for states expanding casino-style gambling and finds that new forms of gambling significantly erode established gambling industries.