Do other businesses suffer when casinos are introduced into a community?

To the contrary, the introduction of a casino expands the overall economy of its host community, in many cases benefiting existing businesses. Gaming, like any industry, can have its own niche in the competitive market without jeopardizing its neighbors’ potential for growth and survival.

This view is supported by the findings of numerous studies. An economic analysis prepared for the National Gambling Impact Study Commission (NGISC) by Penn State University economist Adam Rose found little evidence of economic substitution after the introduction of new casinos. As his meta-analysis reveals: “The preponderance of empirical studies indicate claims of the complete ‘cannibalization’ of pre-existing local restaurants and entertainment facilities by a mere shift in resident spending is grossly exaggerated.”⁽¹⁾

Additional research shows casinos actually stimulate local economies, resulting in communitywide growth in population, jobs, incomes and industry. After studying numerous U.S. casino jurisdictions, researchers at the University of New Orleans concluded the following in their 1997 report, The Effects of Casinos on Local Restaurant Businesses: “When casinos are developed, all aspects of the local food and beverage business increase: the number of establishments increases, the number of people employed increases and payroll increases at an even greater rate than the first two.”⁽²⁾

Similar conclusions were reached in other studies:

• Even after accounting for the so-called “substitution effect,” economists at the University of Missouri and Washington University concluded that casino gambling in Missouri had a net positive annual impact on Missouri output of $759 million, corresponding to a continuing higher level of employment of 17,932 jobs generating $508 million more in personal income.⁽³⁾
• A multijurisdictional analysis of retail spending found that in Biloxi/Gulfport, Miss., annual retail sales growth rates increased an average of 3 percent per year from 1990 to 1992, the year when casinos were introduced. Between 1993 and 1995, retail sales jumped 13 percent. In Will County, Ill., retail sales growth trailed statewide trends until 1992, when riverboat casinos were introduced in the local economy. But each year between 1992 and 1995, retail sales growth in Will County exceeded the state rate. In Shreveport/Bossier City, La., retail sales increased by more than 10 percent during 1994, the year that riverboat casinos opened, as the region enjoyed the highest retail sales increase in more than a decade.⁽⁴⁾
• Representatives of the food industry on Mississippi’s Gulf Coast indicate that casinos have brought in more business. With increased tourism numbers and growth in residents, new franchise restaurants have been opening and local favorites are still bustling. According to Bob Taylor, president of the Coast Chapter of the Mississippi Restaurant Association, “I think the chain restaurant industry on the Coast is going to continue to expand. Whether we have more casinos or not, we’re going to continue to have growth” in noncasino restaurants.⁽⁵⁾

The view that gaming permanently substitutes for other expenditures distorts historical experience. In free market economies, providing new outlets for consumer spending brings in new income. It doesn’t make any difference what the “product” is or whether there’s even a tangible “product” at all. Satisfying consumer demand generates new spending, creates new jobs and increases overall incomes.

References

1. Adam Rose and Associates, The Regional Economic Impacts of Casino Gambling: Assessment of the Literature and Establishment of a Research Agenda, report prepared for the National Gambling Impact Study Commission (State College, Pa.: Adam Rose and Associates, Nov. 5, 1998), 19.
2. George Fenich and Kathryn Hashimoto, “The Effects of Casinos on Local Restaurant Business,” paper presented at the International Conference on Gambling and Risk-Taking, Montreal, 1997.
3. Charles Leven et al., “Casino Gambling and State Economic Development,” paper presented at the Regional Science Association, 37th European Congress, Rome, Aug. 26-29, 1997.
4. Arthur Andersen, Economic Impacts of Casino Gaming in the United States, Volume 2: Micro Study (Washington, D.C.: American Gaming Association, May 1997).
5. Joey Bunch, “Eateries doing well with help of casinos,” The Biloxi (Miss.) Sun Herald, May 25, 2001.