Casino regulations and economic welfare

Abstract This paper studies the entry and tax regulation of oligopolistically competitive privately run casinos and government‐run casinos in a jurisdiction. We highlight three important external effects from casino‐style gambling: non‐casino income creation, social disorder costs, and cross‐border gambling. The laissez‐faire equilibrium need not be overcrowding compared with regulated or government‐run regimes. Entry regulation may lead to higher jurisdiction welfare than tax regulation. Government‐run casinos always operate on a larger scale and achieve higher welfare than other regimes, given the same number of casinos. With an endogenous fraction of external gamblers, a dispersed casino configuration yields higher welfare than a centralized one.     

MEASURING NON‐ECONOMIC WELL‐BEING ACHIEVEMENT

Income per capita and most widely reported, non‐ or non‐exclusively income based human well‐being indicators are highly correlated among countries. Yet many countries exhibit higher achievement in the latter than predicted by the former. The reverse is true for many other countries. This paper commences by extracting the inter‐country variation in a composite of various widely‐reported, non‐income‐based well‐being indices not accounted for by variations in income pre capita. This extraction is interpreted inter alia as a measure of non‐economic well‐being. The paper then looks at correlations between this extraction and a number of new or less widely‐used well‐being measures, in an attempt to find the measure that best captures these achievements. A number of indicators are examined, including measures of poverty, inequality, health status, education status, gender bias, empowerment, governance and subjective well‐being.     

DOES INDIAN CASINO GAMBLING REDUCE STATE REVENUES? EVIDENCE FROM ARIZONA

Critics of Indian gaming contend that reservation casinos have a negative impact on state economies. This paper tests the hypothesis that the introduction of Indian casinos caused a structural change in the formation of Arizona state revenues. Data are from Maricopa County, the largest county in Arizona. Findings suggest that Indian casinos may divert funds from taxable to non-taxable sectors. The growth in tax revenue from non-gaming sectors of the economy has masked these displacement effects. However, given the trend toward increasing the proportion of state funds from sales taxes, a diminution in the rate of economic growth could have serious implications for future state budgets.     

STATE‐LEVEL CAPITAL AND INVESTMENT: UPDATES AND IMPLICATIONS

This paper presents state‐by‐state capital stock and gross investment estimates for 1990–2007. I follow the methodology of Garofalo and Yamarik (The Review of Economics and Statistics, 84, 2002, 316–23) and apportion the national capital stock to the individual states using one‐digit NAICS income data. I then test the soundness of the data by estimating a Cobb–Douglas production function and a Solow growth model using a variety of panel data estimators. Under both models, I obtain estimates of the output elasticity for capital that are plausible and close to the observed national income share of one‐third. (JEL O47, O51, R11)     

The Displacement Effect of Labour‐Market Programs: MONASH Analysis*

A key question concerning labour‐market programs is the extent to which they generate jobs for their target group at the expense of others. This effect is measured by displacement percentages. We describe a version of the MONASH model designed to quantify the effects of labour‐market programs. Our simulation results suggest that: (i) labour‐market programs can generate significant long‐run increases in employment; (ii) displacement percentages depend on how a labour‐market program affects the income trade‐off faced by target and non‐target groups between work and non‐work; and (iii) displacement percentages are larger in the short run than in the long run.     

MEASURING POVERTY USING BOTH INCOME AND WEALTH: A CROSS‐COUNTRY COMPARISON BETWEEN THE U.S. AND SPAIN

We study the correspondence between a household's income and its vulnerability to income shocks in two developed countries: the U.S. and Spain. Vulnerability is measured by the availability of wealth to smooth consumption in a multidimensional approach to poverty, which allows us to identify three groups of households: the twice‐poor group, which includes income‐poor households who lack an adequate stock of wealth; the group of protected‐poor households, which are all those income‐poor families with a buffer stock of wealth they can rely on; and the vulnerable‐non‐poor group, including households above the income‐poverty line that do not hold any stock of wealth. Interestingly, the risk of belonging to these groups changes over the life‐cycle in both countries while the size of the groups differs significantly between Spain and the U.S., although this result is quite sensitive to whether the housing wealth component is included in the wealth measure or not.     

THE BEHAVIOR OF CASINO GAMING REVENUE OVER THE BUSINESS CYCLE CONSIDERING ALTERNATIVE MEASURES OF “INCOME”

Reasons exist for believing that casino gaming revenue does not respond equally to all sources of income over the business cycle. We examine the growth and variability of casino revenue resulting from the growth and variability in different sources of income. We find that casino revenue behaves quite differently in response to short‐run and long‐run variation in each income source, thus revealing that the common use of personal income masks underlying drivers of each state's business cycle. Our results have implications for revenue forecasting models, research on the growth and variability of tax bases in general, and public policy. (JEL H72, H79, L83)     

A NON‐PARAMETRIC MEASURE OF POVERTY ELASTICITY

We estimate the growth elasticity of poverty (GEP) using recently developed non‐parametric panel methods and the most up‐to‐date and extensive poverty data from the World Bank, which exceeds 500 observations in size and represents more than 96 percent of the developing world's population. Unlike previous studies which rely on parametric models, we employ a non‐parametric approach which captures the non‐linearity in the relationship between growth, inequality, and poverty. We find that the growth elasticity of poverty is higher for countries with fairly equal income distributions, and declines in nations with greater income disparities. Moreover, when controlling for differences in estimation technique, we find that the reported values of the GEP in the literature (based on the World Bank's now‐defunct 1993‐PPP based poverty data) are systematically larger in magnitude than estimates based on the latest 2005‐PPP based data.     

Casinos and political corruption in the United States: a Granger causality analysis

The commercial casino industry experienced an unprecedented expansion in the United States during the 1990s. As the industry has grown, so has the anecdotal evidence that links the casino industry with political corruption. However, there have been no empirical analyses of the issue. We use state-level panel data from 1985–2000 to posit a Granger causality analysis of the relationship between corruption convictions of state public officials and the predicted adoptions of casinos at the state level. We find evidence that predicted casino adoptions Granger cause corruption convictions. This finding is suggestive of a scenario of regulatory capture and may help explain why state-level gaming regulatory agencies have a history of softening gaming regulations after the initial introduction of casinos. Our study provides the first empirical evidence linking casinos to political corruption.     

Non‐linear finance–growth nexus

This paper revisits the question of whether the finance–growth nexus varies with the stages of economic development. Using a novel threshold regression with the instrumental variables approach proposed by Caner and Hansen (2004) to the dataset used in Levine et al. (2000) we detect overwhelming evidence in support of a positive linkage between financial development and economic growth, and this positive effect is larger in the low‐income countries than in the high‐income ones. The data also reveal that financial development tends to have stronger impacts on capital accumulation and productivity growth in the low‐income countries than in the high‐income ones. The findings are robust to alternative financial development measures and conditioning information sets.     

Viewpoint: Further results on measuring the well‐being of the poor using income and consumption

Abstract We evaluate the relative merits of income‐ and consumption‐based measures of well‐being. Our results provide evidence that consumption better captures well‐being for those with few resources. The bottom deciles of expenditures exceed those of income, suggesting under‐reporting of income. The under‐reporting rate for government transfers is high and rising. Overall non‐response is more severe in U.S. income data than in expenditure data. Furthermore, a consumption data set requires fewer observations than an income data set to obtain the same level of precision for typical estimates. Finally, very low consumption is more strongly related to other bad outcomes than very low income.     

Income or Consumption: Which Better Predicts Subjective Well‐Being?

The positive relationship between income and subjective well‐being has been well documented. However, work assessing the relationship of alternative material well‐being metrics to subjective well‐being (SWB) is limited. Consistent with the permanent income hypothesis, we find that a consumption‐based measure out‐performs (surveyed) income in predicting subjective well‐being. When objective measures of consumption are combined with self‐assessments of a household’s standard of living, income becomes insignificant altogether. We obtain our result utilizing household‐level data from Statistics New Zealand’s New Zealand General Social Survey which contains measures of income, SWB and a measure of material well‐being called the Economic Living Standard Index that combines measures of consumption flows and self‐assessments of material well‐being.     

THE INCOME REDISTRIBUTION EFFECT OF CHINA'S PERSONAL INCOME TAX: WHAT THE MICRO‐DATA SAY

This article uses continuous micro‐level data to investigate the income redistribution effect of the personal income tax (PIT) in China beginning in 1997. We find that the average tax rate plays a larger role in determining the income redistribution effect of PIT than tax progressivity does. Although tax progressivity decreased as a result of rising personal incomes and a constant PIT policy prior to 2005, the income redistribution effect of the PIT improved as a result of the higher average tax rate. The tax reform beginning in 2006 increased tax progressivity while decreasing the average tax rate, thereby weakening the income redistribution effect of the PIT. Further analysis indicates that the middle‐income group was the only net loser before 2005, but it benefited from the PIT policy reform. A cross‐country comparison shows that China has a lower PIT burden and higher progressivity than developed countries; in fact, China's levels of progressivity and tax burden are similar to those of Latin American countries. (JEL H24, D31, H31)     

A Note on α‐Gini Measures

This note provides a characterization of α‐Gini inequality measures. These measures generalize the standard Gini index by including one sensitivity parameter α, which captures different value judgments. The α‐Gini measures are shown to be weakly decomposable and unit consistent. Weak decomposition provides within‐group and between‐group inequalities. Unit consistency keeps unchanged the ranking of two income distributions when the income units vary. It is shown that the α‐Gini measures are relevant with either “leftist” or“rightist” views.     

Skill Upgrading in New Zealand, 1986–2001

Educational attainment increased markedly in New Zealand between 1986 and 2001, while the income premia for higher qualifications first increased and then stabilised or decreased over the 1990s. We first document the growth in qualification‐based skills and then examine its contribution to average income growth and the relationship with relative demand changes. Of the 15 per cent increase in real average incomes between 1986 and 2001, upskilling accounted for 25 per cent, while 70 per cent was due to income growth across all qualifications. The pattern of qualification employment share and relative income changes provides evidence of changing demand for skills within detailed industry–occupation cells.     

Analysing Recent Changes in Indigenous and Non‐Indigenous Australians' Income: A Synthetic Panel Approach

Data from the 1986, 1991 and 1996 censuses are used to conduct a synthetic cohort analysis of the income distributions for Indigenous and non‐Indigenous males and females. The advantage of this approach is that statistical techniques can be used to control for unobservable differences between the Indigenous and non‐Indigenous populations, such as ability and schooling quality, as well as assimilation, discrimination and other attitudes. The results demonstrate that the failure to control for unobserved differences in existing studies of Indigenous income will induce a significant bias in both empirical and policy analysis. Trends in relative income are also identified and are related to broad changes in labour force status. The deliberate policy shift in the early 1990s to paying welfare to individuals (‘individualisation’) has resulted in an increase in financial independence among many females. The other insight from the analysis is that the generosity of welfare payments or improved targeting of benefits has materially advantaged extremely poor Indigenous people. While this is a positive outcome in its own right, policy also needs to take into account the interaction between tax, welfare, productivity and incentives to work.     

Does High‐skilled Migration Affect Publicly Financed Investments?

This paper analyzes the interaction between migration of high‐skilled labor and publicly financed investment. We develop a theoretical model with multiple, ex ante identical jurisdictions where individuals decide on education and subsequent emigration. Migration decisions are based on differences in net income across jurisdictions which may occur endogenously. The interaction between income differences and migration flows gives rise to the potential of multiple equilibria: a symmetric equilibrium without migration and an asymmetric equilibrium in which net income levels differ among jurisdictions and trigger migration flows. In the former equilibrium, all jurisdictions have the same public investment level. In the latter one, public investment is high in host economies of skilled expatriates and low in source economies. We empirically test the hypothesis that emigration rates are negatively associated with publicly financed investment levels for OECD countries.     

DO MANAGERS MATTER: EVIDENCE FROM E‐SPORTS

Growing importance of human resources places the role of managers at the core of company efficiency. However, there are studies that demonstrate the efficiency of teams without a manager, so‐called self‐managed teams, is higher comparing with managed teams. Thus, despite the focus on managerial efficiency in the economic literature, the issue of whether a team needs a manager is far from settled. In this paper, we use a quasi‐experimental setting from e‐Sports (competitive video gaming) to understand whether the hiring a manager is of benefit to team performance. The empirical part of the study is based on endogenous switching regression model. This method allows investigating what performance of self‐managed team would be if it will have a manager and vice versa. The dataset includes the information of prize money and features of top e‐Sports teams in Counter‐Strike: Global Offensive (e‐Sports discipline) from 2013 to 2017. The main finding of this study is that managed teams perform better than self‐managed ones but this is not due to the manager. (JEL Z2, M54, L25)     

PERCEIVED ARSENIC‐RELATED MORTALITY RISKS FOR SMOKERS AND NON‐SMOKERS

Prolonged ingestion of arsenic in drinking water can increase the risks of dying of lung and bladder cancer, particularly for smokers. In a survey of arsenic hotspots in the United States, we elicited individuals' subjective mortality risks related to the presence of arsenic in drinking water. Using this data, we address whether smokers perceive mortality risks from this source differently from non‐smokers. We find that those who have smoked at some point in their life have significantly higher perceived arsenic mortality risks than those who have never smoked, on average. We also find that the sample group of current smokers has higher average perceived arsenic mortality risks than those who have quit smoking. We model the decision to treat water for arsenic and find some evidence that current smokers are less likely to engage in this mitigating behavior than are ex‐smokers or non‐smokers even though their perceived risk is higher. We infer that smokers are either less risk averse or have a higher rate of time preference than non‐smokers and ex‐smokers. (JEL I0, D81, Q53)     

WHO BENEFITS FROM PRICING REGULATIONS WHEN ECONOMIC SPACE MATTERS?

Reinterpreting Hwang‐Mai (AER, 1990) by both simplifying and generalizing their analysis in terms of two key demand parameters representing income and market size, we probe the welfare effects of spatial price discrimination to determine how robust the previous welfare findings in the literature are. Endogenous location matters when a monopolist chooses asymmetric location under different pricing schemes. If he/she remained at the same location, outcomes of fixed and endogenous location models must be analytically the same. Endogenous and different location changes outcomes radically. When non‐discriminatory pricing regulations benefit the poor, different transportation burdens mean that the rich become poor, even worse off than the ex‐poor, and the society becomes worse off accordingly.