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Does Casino Development Have a Positive Effect on Economic Growth?
Author(s) -
Lim Siew Hoon,
Zhang Lei
Publication year - 2017
Publication title -
growth and change
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.657
H-Index - 55
eISSN - 1468-2257
pISSN - 0017-4815
DOI - 10.1111/grow.12182
Subject(s) - endogeneity , economics , instrumental variable , per capita income , panel data , econometrics , per capita , demographic economics , variable (mathematics) , econometric model , variables , autocorrelation , statistics , mathematics , demography , population , mathematical analysis , sociology
This study examines the relationship between casinos and economic growth in the U.S. Using county‐level data on the 48 contiguous states from 2003 to 2012, we estimate the effect of casinos on per capita income growth and job creation. Our research procedures include examining the relationship using level‐to‐level panel data, and 3‐year and 10‐year differenced data. An instrumental variable approach is also considered to account for potential endogeneity of the casino variable. Although, the instruments are both relevant and exogenous, test results found insufficient evidence of endogeneity in our panel data models. In addition, we estimate a spatial error model (SEM) to account for the unobserved spatial characteristics that may affect economic growth in the counties but are not captured by our conventional econometric models. Our results show that casinos had a positive effect on per capita income; casino expansions exerted a small, positive effect on both per capita income growth and job growth. However, the effect of casino expansions on 10‐year per capita income growth dissipated when we controlled for the spatial autocorrelation in our model. Nevertheless, the SEMs results also suggest that casino expansions continued to have a positive effect on the 2003–2012 job growth.