The effect of casino proximity on lottery sales: Zip code-level evidence from Maryland

The continued expansion of the casino industry has caused increasing concern regarding the cannibalization of other industries (e.g., state lotteries), an issue of particular importance to policymakers since casinos and lotteries can make a significant impact on state budgets. Although previous papers have found that casinos and lotteries act as substitutes, no previous research has analyzed the impact of casino proximity on lottery sales or examined the relationship between casinos and different types of lottery games. In this paper we examine zip code-level monthly lottery sales data from Maryland between July 2009 and February 2014. Using a two-way fixed effects OLS model, we test the impact of casino proximity on lottery sales by type of game. Our findings indicate that lottery sales decline more in close proximity to casinos, with monitor and multi-state games most affected. We estimate that casinos in Maryland have led to a decrease in lottery sales of approximately $44-50 million per year, or 2.7% of annual sales. Two additional casinos will have opened in Maryland between the end of our sample period and the end of 2016. We forecast the impact of these casinos to be an additional decline in annual lottery sales of approximately $45 million, or another 2.6% of sales. Replication of this analysis in other jurisdictions could help to guide policymakers toward more efficient gambling policy. (223 words)