The Impact of State Lotteries and Casinos on State Bankruptcy Filings

Authors

  • Kent R. Grote,

  • Victor A. Matheson


  • Kent R. Grote is an assistant professor at the Department of Economics and Business, Lake Forest College, Lake Forest, IL 60045, USA. His e-mail address is: grote@lakeforest.edu. Victor A. Matheson is a professor at the Department of Economics and Accounting, Box 157A, College of the Holy Cross, Worcester, MA 01610-2395, USA. His e-mail address is: vmatheso@holycross.edu, JEL Classification Codes: D81, H71, L83

Abstract

Over the past half century, there has been an increasing prevalence of legalized gambling in the U.S. At the same time, there is a general recognition, empirically supported in the economics literature, that spending on lottery and gaming products tends to be regressive in nature. In addition, gambling addiction is a widely acknowledged social problem. This raises the question of whether the increased presence of casinos and state lotteries results in relatively more bankruptcy filings in the states that offer them. This paper adds to the existing literature by comparing the relative impact of the presence of lotteries to that of casinos on both personal and business bankruptcies. States that adopted lotteries and casinos prior to 1995 experienced significantly higher personal bankruptcy rates while the effect of lottery and casino adoption on personal bankruptcies has disappeared since that time.

Ancillary