Productivity Measurement in Gambling: Plant-Level Evidence from Gambling Establishments in the United Kingdom

Abstract

There have been numerous studies of the impact of investment in information technology (IT) on manufacturing productivity (e.g., Brynjolfsson and Hitt (1996)) and Morrison (1997)), but little evidence on this relationship in services. We attempt to fill this gap, by analyzing the impact of IT on the relative productivity of gambling establishments. Ours is also the first empirical study of productivity in gambling, one of the fastest growing industries in the service sector. The econometric analysis is based on data from the Annual Respondents Database (ARD) file, consisting of individual establishment records from the U.K. Annual Census of Production. The ARD file contains detailed data on output, materials, energy, employment, and numerous plant and firm characteristics and is quite similar to the U.S.-based Longitudinal Research Database (LRD). Production function models provide an excellent fit to the data, yielding plausible elasticity estimates and indicating constant returns to scale. More importantly, we find that gambling establishments investing more heavily in computers are more productive than comparable establishments.

Keywords: efficiency, productivity and measurement, technology

JEL Classification: D24, 033