Abstract
This paper employs a general equilibrium framework to analyze the effects on economic growth of global expansions in casino gaming, which exports gambling services largely to non-residents. Both domestic and foreign investments in the gaming sector bring in not only substantial revenues but also positive spillover effects on related sectors and even on the entire local economy. However, an over-expansion of commercial gambling may lead to deterioration in the terms of trade with an adverse impact on real income. If this situation persists, it would not be impossible for immiserizing growth to occur. As a highly profitable sector, casino gaming may enable its operators to diversify out of this risk if they invest retained profits in non-gaming sectors to cash in on the spillover effects it has created. The gaming-dominant economy can then be directed on a more balanced and sustainable growth path, and will become less susceptible to business cycles. Indeed, economic experiences in the world’s major casino resorts are consistent basically with this argument for diversification. We believe that after the current global crisis fades away, economic growth and resulting surges in global demand for gambling services can provide further opportunities for the expansion of existing casino resorts and the development of new gaming markets.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Although a number of recently published papers investigate the contributions of legal casino gaming to economic growth, most, if not all, of them do not employ a standard economics approach to addressing the issues under consideration.
In this study, the term “local economy” refers to a specific geographical area, which is not necessarily a sovereign state (i.e., a country) but may be a city, a metropolitan area, or a country with a number of economic sectors. Accordingly, trade flows in this paper are not a national—but a territorial-based concept of transactions in goods and services.
See Markusen et al. (1995) and Varian (2006) for the properties of the production possibilities frontier. The PPF curve is strictly bowed out from the origin, reflecting the rising opportunity cost of producing one good measured in terms of another good as a result of requiring different factor proportions and/or the variability of factors’ aptitudes in different occupations. This geometric property arises naturally if decreasing returns to scale prevail in all sectors (i.e., the average cost AC rises with scale of output), and can also happen even if the production of either x 1 or x 2 exhibits constant returns to scale (i.e., the AC stays constant regardless of output). Even in the case of increasing returns to scale (i.e., the AC drops as output expands) which are not sufficiently strong, we can safely assume that the PPF curve still bows out except near the axes (Caves et al. 2007).
How to price commercial gambling is an unsolved issue hard to address. Casino operators may observe the gambling price (as a price setter), but gambling patrons do not (as a price taker). Although there is no explicit or trading price for gambling services, an implicit or theoretical price must exist between casinos on the supply side and patrons on the demand side. This question is largely a matter of empirics, so will not be important in our theoretical discussion on trade equilibrium.
This framework is universally applicable to gaming issues in many locations. In the case of America, the sum of all gaming facilities is referred to as a gaming-based economy (called A), and all other U.S. economic sectors and foreign economies such as their visitors (call B) are viewed as the trading partner of economy A. Then economy A exports gambling services to economy B while importing all other goods from the latter. Then one can study U.S. gaming economic impacts such as the contribution of gaming expansions to local growth in casino resorts.
DSEC—E-Publications—Tourism and Services—Visitor Arrivals (2009).
Normally, casino gambling services are considered a labor-intensive product by operation (Walker 2007, p. 166).
References
Analysis Group, Inc. (2005). A survey of urban gaming in America. Los Angeles, CA.
Appleyard, D. R., Field, A. J., Jr., & Cobb, S. L. (2008). International economics (6th ed.). New York: McGraw-Hill.
Carbaugh, R. J. (2009). International economics (12th ed.). Mason, OH: Thomson, South-Western.
Caves, R. E., Frankel, J. A., & Jones, R. W. (2007). World trade and payments: An introduction (10th ed.). Boston, MA: Pearson Education.
Christiansen, E. (2005). The impacts of gaming taxation in the U.S. Christiansen Capital Advisors LLC, American Gaming Association.
Cotte, J. (1997). Chances, trances, and lots of slots: Gambling motives and consumption experiences. Journal of Leisure Research, 29(4), 380–406.
Datamonitor. (2009). Casino & gaming in Asia-Pacific: Industry profile. Australia: Datamonitor Asia-Pacific.
DICJ. (2006). Data-Statistics-2007. Retrieved July 5, 2008 from http://www.dicj.gov.mo/EN/index.htm.
DICJ. (2007). Survey on Manpower Needs and Wages. Retrieved July 5, 2008 from http://www.dsec.gov.mo/index.asp?src=english/html/e_employment.html.
DICJ. (2008). Data-Statistics-2008. Retrieved November 3, 2008 from http://www.dicj.gov.mo/EN/Estat/DadosEstat/2008/estat.htm#n1.
DSEC. (2007). E-Publications—Tourism and Services—Visitor Arrivals. Retrieved August 5, 2008 from http://www.dsec.gov.mo/index.asp?src=/english./html/e_tourism.html.
DSEC. (2008). E-Publications—Tourism and Services—Visitor Arrivals. Retrieved November 3, 2008 from http://www.dsec.gov.mo/index.asp?src=/english./html/e_tourism.html.
DSEC. (2009). Gross Domestic Product—By Expenditure Approach. Retrieved October 15, 2009 from http://www.dsec.gov.mo/Statistic.aspx?lang=en-US.
Ernst & Young. (2007). Global gaming bulletin (25th anniversary edition). UK: EYGM Limited.
Ernst & Young. (2008). Reviewing the market: The 2008 global gaming bulletin. UK: EYGM Limited.
Goertzel, T. G., & Cosby, J. W. (1997). Gambling on jobs and welfare in Atlantic City. Society, 34(4), 62–66.
Gross, M. (1998). Legal gambling as a strategy for economic development. Economic Development Quarterly, 12(3), 203–213.
Gu, X. H., & Li, G. Q. (2009). Why do various gaming markets adopt different tax rates? Journal of Gambling Business and Economics, 3(1), 65–88.
Hall, C. M., & Hamon, C. (1996). Casinos and urban redevelopment in Australia. Journal of Travel Research, 34, 30–36.
Ho, J., & Jalal, K. (2004). City on fire: Macau real estate market. Macau Business, October, 18–22.
Janson, D. (1989). Casino funds to aid project in urban areas. New York Times, January 15.
Kilby, J., Fox, J., & Lucas, A. F. (2005). Casino operations management (2nd ed.). Hoboken, NJ: Wiley.
Lau, A. (2007), Casino confessions: game is over. Macau Business, August, 18–22.
Lucas, A. F. (2002). Assessing the profitability of premium players: High rollers may not mean high profits, particularly when casinos offer financial incentives to attract premium players. Cornel Hotel and Restaurant Administration Quarterly, 34(4), 65–78.
MAM (Monetary Authority of Macao). (2009). Annual Reports for Year 2008, see its website at: www.amcm.gov.mo/Annual_Reports/Report.htm.
Markusen, J. R., Melvin, J. R., Kaempfer, W. H., & Maskus, K. E. (1995). International trade: Theory and evidence. New York: McGraw-Hill.
Rephann, T. J., Dalton, M., Stair, A., & Isserman, A. (1997). Casino gambling as an economic development strategy. Tourism Economics, 3(2), 161–183.
Rose, A. and Associates. (1998). The regional economic impacts of casino gambling: assessment of the literature and establishment of a research agenda. Retrieved July 19, 2008 from http://govinfo.library.unt.edu/ngisc/reports/ecoimprpt.Pdf.
Siu, R. C. S. (2007). Is casino gaming a productivity sector? A conceptual and cross-jurisdiction analysis. Journal of Gambling Business and Economics, 1(2), 129–146.
Thompson, W. N., & Stream, C. (2006). Casino taxation and economic development: American lessons for Asian policymakers. Law, regulation and control issues of the Asian gaming industry (pp. 39–82). Institute for the Study of Commercial Gaming, University of Macao: Macao SAR.
Tso, A. (2008). Stalled flight. Macao Business, July, 72–75.
Varian, H. R. (2006). Intermediate microeconomics (7th edition): A modern approach. New York: W W Norton & Company.
Walker, D. M. (2007). The economics of casino gambling. New York: Springer.
Wynn, S. (1993). Legalized gaming: winners and losers. WLC Annual Meeting, September.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Li, G., Gu, X. & Siu, R.C.S. The Impacts of Gaming Expansion on Economic Growth: A Theoretical Reconsideration. J Gambl Stud 26, 269–285 (2010). https://doi.org/10.1007/s10899-009-9165-5
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10899-009-9165-5