Casinos, Crime and Community Costs

33 Pages Posted: 6 Oct 2000  

Earl L. Grinols III

Baylor University - Department of Economics

David B. Mustard

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics; IZA Institute of Labor Economics; University of Georgia Law School

Cynthia Hunt Dilley

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: June 2000

Abstract

Casino gaming - providing negative expected return with positive variance - has puzzled economists with respect to a number of issues, including the extent to which casinos are tied to externalities. In the case of tobacco, the link between use and health-related externalities has led to state lawsuits to recover social costs. This paper studies the connection between casinos and crime using county-level data for every US county between 1977 and 1996, spanning the introduction of casinos to states other than Nevada. We find that casinos increased crime after a lag. The data indicate that 8% of crime observed in casino counties in 1996 was attributable to casinos. The average annual cost of increased crime due to casinos was $65 per adult per year. Furthermore, by studying the crime rates in counties that border casinos host counties we show that casinos create crime, not merely move it from one area to another. If anything, the neighbor data indicate that casino crime spills over into the border counties rather than is moved from them. Last, we explain why other studies have sometimes failed to identify a link between casinos and increased crime rates.

Keywords: Casinos, Crime, Externalities, Social Cost, Pigouvian Taxes

JEL Classification: K0, K2, H2

Suggested Citation

Grinols, Earl L. and Mustard, David B. and Dilley, Cynthia Hunt, Casinos, Crime and Community Costs (June 2000). Available at SSRN: https://ssrn.com/abstract=233792 or http://dx.doi.org/10.2139/ssrn.233792

Earl L. Grinols III

Baylor University - Department of Economics ( email )

P.O. Box 98003
Waco, TX 76798-8003
United States
(254) 710-7522 (Phone)
(254) 710-6142 (Fax)

David B. Mustard (Contact Author)

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States
706-542-3624 (Phone)
706-542-3376 (Fax)

HOME PAGE: http://www.terry.uga.edu/~dmustard/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

University of Georgia Law School

225 Herty Drive
Athens, GA 30602
United States

Cynthia J. Hunt Dilley

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

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