The impact of casino gambling on housing markets: A hedonic approach

Abstract

The social and economic impact of casino gambling has been a contentious issue in both the popular and academic press. Prior academic research has focused largely on constructing piece-by-piece cost benefit accounting, but theoretical and measurement issues have prevented researchers from reaching a consensus as to the bottom line impact of casino gambling. This paper uses a hedonic approach to estimate directly the implicit price and the welfare impacts of a casino on its local area. The hedonic approach provides consistent estimates of the net change in social welfare without relying on a piecemeal approach to measuring costs and benefits. Using data from the 1990 and 2000 U.S. Census of Population and Housing, the estimated net benefit of casino gambling at year 2000 levels was approximately 2% of household value, or about $2,000-$3,000 per household for households living near a casino. Additionally, there are positive spillover effects to neighboring in-state regions and no significant costs to out-of-state border regions. A particularly important finding for policymakers is that the benefits associated with a casino depend inversely on population density. Casinos are more likely to create net benefits in areas where population density is low.

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