Matching Estimation, Casino Gambling and the Quality of Life

Little consensus exists in the literature as to the impact of casino gambling on regional economic development. This paper uses a propensity score matching estimator to assess the bottom line impact of casino gambling on the welfare of local residents. It extends the literature in two important ways. First, the traditional matching estimation model is extended to consider a kernel weighting formula that corrects for correlation between the outcome error term and characteristics of the regressors used in generating the propensity scores. Second, by using the matching procedure to control for selection bias in the casino location decision, this paper generates improved estimates for the impact of casino gambling on key economic variables and on local quality of life. Casinos are found to have no statistically significant net impact on the quality of life in their host counties, though Native American casinos do generate some additional economic activity in the form of increased population, employment, and housing starts. JEL Codes: O12, R1, R13, R58 I gratefully acknowledge support from the U.S. Department of Housing and Urban Development Doctoral Dissertation Research Grant Program. This paper was prepared during my time as a graduate student at University of Illinois at Chicago. I am thankful also for helpful comments from Dan McMillen, Barry Chiswick, Joe Persky, Gib Bassett, John Tauras and Josh Linn. Any errors are my own.