Do Gambling Firms Target Crime-Prone Areas?

Abstract

We investigate the causal effect of local crime on betting shop openings. Crime in an area can generate demand for gambling services as criminals and gamblers may share similar preferences: risk loving and instant gratification. To isolate the effect, we develop an empirical model to study the firm-side incentives driving the opening of betting shops. We estimate a panel model employing an instrumental variable approach using data from London boroughs for 2006 to 2015. The instrumental variable is built upon the differences in traveling patterns between gamblers and criminals. Our result shows that a 1% increase in the local crime rate causes a 0.3% to 1.3% increase in the number of betting shops per capita. This result is robust across a variety of econometric specifications.

Keywords: Entry, Gambling Industry, Betting Shops, Local Crime, Gambling Act, Causal Effect

JEL Classification: J1, L5, K0