Although the casino industry argues that it spurs local and regional economic growth by providing high-paying jobs and paying taxes and fees to local and state governments, there is little empirical research on the issue. Studies such as Arthur Andersen (1996), commissioned by the casino industry, are biased and amount to little more than static comparisons or listings of taxes paid and employees hired by the casino industry.
The lack of empirical studies on the U.S. casino industry is not surprising given the relatively recent expansion of casinos. Even so, there have been few studies on the economic effects of the casino industry. The studies that have been published tend to focus on the relationships among casinos, other gambling industries, and tax revenues.
Other studies have examined the negative consequences of casino gambling and pathological gambling behavior, such as crime and bankruptcy. Few studies have examined whether casinos stimulate economic growth or supplement state government revenues. the economic and social impacts of gambling in the u.s. 111 Walker and Jackson (1998) were among the first to study the effects of the new casino industry in the United States.
We analyzed the relationship between state-level casino revenues and per capita income. To do this, we developed a process for adapting Granger causality testing to panel data. The reason we utilized a panel was because at the time of the analysis relatively few states had casino gambling.
The states that did have casinos, other than Nevada and New Jersey, had them for at most six years. Hence it was impossible at the time to analyze the states individually. In a more recent paper (Walker and Jackson 2007) we repeated the earlier study using annual data through 2005. The process we used to adapt Granger causality testing for use with panel data is described below.