THE EFFECT OF CASINO PROXIMITY ON LOTTERY SALES: EVIDENCEFROM MARYLAND

WILL E. CUMMINGS, DOUGLAS M. WALKER and CHAD D. COTTI∗

The continued expansion of the casino industry has caused increasing concernregarding the cannibalization of other industries, and in particular, state lotteries.For example, Maryland Lottery sales flattened shortly after casinos began openingin the state. Although previous papers have found that casinos and lotteries have anegative relationship with each other, no previous research has analyzed the impactof casino proximity on lottery sales or has examined the relationship between casinosand different types of lottery games. In this paper, we examine ZIP code-level monthlylottery sales data from Maryland between July 2009 and February 2014, in order to testthe impact of casino proximity on lottery sales, by type of game. Our findings indicatethat aggregate lottery sales decline more in closer proximity to casinos, but that casinosaffect different lottery products differently. We discuss the consumer behavior and publicfinance implications of the findings. (JEL H27, H4, L83)

I. INTRODUCTION

Legal gambling has been an important policyissue for state governments since New Hampshireintroduced a lottery in 1964. Other states fol-lowed suit, and now only a few states do not havelotteries. Beginning in 1989 legal casinos beganto spread outside Nevada and Atlantic City, NJ,and well over 1,000 casinos now operate in theUnited States.1 For calendar 2015, U.S. casino

∗The authors thank Russell Sobel for assistance with dataanalysis on an earlier draft, and Patricia McQueen for sharingher insights and selected lottery data. The Maryland Lotteryand Gaming Control Agency (“Maryland Lottery”) provideddata for this project through its vendor, Scientific Games. Thispaper is an extension of a report Cummings and Walker wrotefor the Maryland Lottery in 2014. The views expressed in thispaper are solely those of the authors.Cummings: Principal, Cummings Associates, Arlington, MA

02476. Phone 781-641-1215, Fax 781-641-0954, E-mailcummingsw@aol.com

Walker: Professor of Economics, Department of Economicsand Finance, College of Charleston, Charleston, SC29401. Phone 843-953-8192, Fax 843-953-0754, E-mailWalkerD@cofc.edu

Cotti: Oshkosh Corporation Endowed Professor, Depart-ment of Economics, University of Wisconsin Oshkosh,Oshkosh, WI 54901. Phone 920-424-3013, E-mailCottiC@uwosh.edu

1. A casino listing by state is available at www.casinocity.com or in American Gaming Association (2016). For ananalysis of the factors affecting lottery adoptions, see Alm,McKee, and Skidmore (1993) or Jackson, Saurman, andShughart (1994); for a similar analysis of commercial casinos,see Calcagno, Walker, and Jackson (2010).

revenues were estimated to be $73.3 billion; U.S.lottery sales in fiscal year 2015 were $73.8 bil-lion.2

Gambling taxes can be significant sources ofstate government revenue, and tax revenues havebeen a primary motivation for the legalizationof gambling. The effective lottery “tax” aver-ages around 40%, after accounting for adminis-trative expenses (Perez and Humphreys 2013).Commercial casino gross revenues are taxed atvarious rates, historically ranging from about6% in Nevada up to nearly 70% in states suchas Delaware, Maryland, New York, and RhodeIsland (American Gaming Association 2013).3

As casino expansion continues across theUnited States, there is increasing concern thatcasino revenues may come at the expense of lot-tery sales (i.e., revenue “cannibalization”), rais-ing questions about the net tax impacts of casino

2. Aggregate casino revenue data are from www.statista.com. Historical annual estimates suggest that 60% of rev-enues come from state-regulated commercial casinos, whilearound 40% come from tribal casinos. Lottery sales data arefrom the North American Association of State and ProvincialLotteries, at www.naspl.org/nasplmembers/.

3. The Delaware and New York “tax” rates includeallocations to horsemen’s purses at those states’ race trackcasinos (http://www.ncsl.org/research/financial-services-and-commerce/casino-tax-and-expenditures-2013.aspx;New York Office of Budget and Policy Analysis 2014);Maryland (as of the date of this study) and Rhode Island alsoowned the slot machines employed at their casinos, therebyabsorbing some of the costs of casino operations.

1

Contemporary Economic Policy (ISSN 1465-7287)doi:10.1111/coep.12225© 2017 Western Economic Association International

2 CONTEMPORARY ECONOMIC POLICY

legalization. Although there have been analysesof the interindustry relationships between casi-nos and lotteries, many of these studies werepublished at a time when casinos were relativelyisolated.4 Such casinos could attract large num-bers of visitors from out-of-state, which likelymitigated any negative impacts these casinos mayhave had on a state’s lottery. Nevertheless, laterevidence still suggests that lotteries and casinosare generally substitutes (Walker and Jackson2008). No published study to date has addressedthe degree to which proximity to casinos impactslottery sales, nor has any examined the rela-tionship between casinos and specific types oflottery games. These issues are fundamental inunderstanding the net effects of legalizing orexpanding casino gambling, and in particular thelikely impact of new casinos on existing lotteries.

In this study, we use ZIP code-level monthlylottery sales data from the Maryland State Lot-tery and Gaming Control Agency to analyze theimpact of casino proximity on the sales of differ-ent types of lottery products. Our analysis focuseson Maryland, where the first casino began oper-ating in September 2010. We examine the impactof casinos on lottery sales using lottery salesdata from July 2009 through February 2014. Ourfindings suggest that casinos have had a signifi-cant negative impact on Maryland’s lottery sales,and that the impact varies by lottery product.Furthermore, our results indicate that the impactof casinos on lottery sales is very sensitive tocasino proximity.

This study provides important evidence onhow two forms of gambling affect each other,which could be of great interest to policymakersin most states and in jurisdictions around theworld. Furthermore, the analysis in this studycould be adapted to analyze other markets, as theimpacts of casinos on lotteries are likely to besensitive to jurisdictional idiosyncrasies.

II. BACKGROUND AND LITERATURE REVIEW

With the continued expansion of casi-nos across the United States, there has beenincreasing concern that casinos may competefor revenue with state lotteries. If casinos attractrevenues at the expense of lottery sales (i.e., ifcasinos “cannibalize” lottery revenues), then theactual net impact of casino tax revenue could

4. For example, see Siegel and Anders (2001), Elliott andNavin (2002), and Fink and Rork (2003), all of which arediscussed in the next section.

fall short of policymakers’ expectations andcasino industry promises. There have been anumber of studies in the literature which exam-ine interindustry relationships among gamblingproducts. We review that literature, but first pro-vide some background information on casinosand the lottery in Maryland—the focus of ourempirical analysis.

A. Background on Maryland

The Maryland Lottery began in 1973, and bythe mid-1990s, annual sales surpassed $1 bil-lion per year. Casinos were legalized in Mary-land in 2008, and the Hollywood Casino was thefirst to open in September of 2010 in Perryville.Five other casinos have opened since then: OceanDowns (January 2011), Maryland Live (June2012), Rocky Gap (May 2013), the Horseshoe(August 2014), and the MGM National Harbor(December 2016). These casinos initially pro-vided only slot machines; table games were legal-ized at Maryland casinos in spring 2013. Figure 1is a map of Maryland that shows the locations andopening dates of all six casinos in the state, aswell as nearby casinos outside Maryland.5

Gambling in Maryland is regulated by theMaryland Lottery and Gaming Control Agency(hereafter referred to as “Maryland Lottery”),which operates the lottery and oversees the casi-nos in the state. Revenues the state receive fromthe lottery and casinos are pooled and distributedto a variety of programs. For example, in fiscalyear 2015, the lottery contributed about $1 billionto “The Maryland Education Trust Fund; publichealth and safety; small-, minority- and women-owned businesses; horse racing; veterans’ orga-nizations; and more.” About $525 million camefrom the lottery, and $487 million was raisedfrom casino taxes.6

Aggregate casino revenues in the state havesteadily climbed, of course, as new casinosopened. Nominal lottery sales growth, on theother hand, has been modest over the past twodecades. Figure 2 illustrates the nominal annuallottery sales in Maryland and some nearby states.Lottery sales in Maryland appear to be flat sincefiscal year 2008, with a slight decline beginningin fiscal year 2013.7 While one might expect

5. See footnote 22 for more detail on casino opening datesin states adjacent to Maryland.

6. http://mlgca.com/where-the-money-goes/7. Although not shown in Figure 2, the negative lottery

sales trend in Maryland continued into fiscal year 2014, butrebounded slightly in fiscal year 2015 (Maryland Lottery andGaming Control Agency 2015).

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 3

FIGURE 1Map of Casino Locations in Maryland and Surrounding States

the 2007–2009 recession to have had a negativeimpact on state lotteries, a comparison with othernearby states raises doubt that the recession aloneexplains Maryland’s recent lottery performance.

Given that the casino expansion in Marylandcoincides closely with the leveling-off of lotterysales, Maryland provides a suitable case studyof the relationship between casinos and lotter-ies.8 An explanation of the decline in lotterysales would presumably be of great interest topolicymakers in Maryland and in other stateswith expanding casino industries and stagnant orshrinking lotteries.

B. Literature Review

Lotteries received much attention in the liter-ature during the 1980s and early 1990s, particu-larly focused on explanations for their adoption,their regressivity, and cross-border purchases.9

8. It is interesting to note that Pennsylvania’s firstcasino opened in November 2006. Lottery sales wereflat there from 2006 to 2010, perhaps due in part tothe recession. Since 2010, the Pennsylvania Lottery’ssales have been increasing (https://www.palottery.state.pa.us/About-PA-Lottery/Annual-Economic-Reports.aspx).

9. For a comprehensive, but somewhat dated discussionof lotteries, see Clotfelter and Cook (1991). For a discussionof the factors affecting the decision to adopt lotteries, see

More recently, researchers have begun to analyzethe interindustry relationships among differentforms of gambling. Several studies have lookedat the relationships among different types of lot-tery products, focusing either on revenues fromparticular lottery games or aggregate govern-ment lottery revenues.10 For example, using tele-phone survey data from Spain, Humphreys andPerez (2012) found that different types of lot-tery products appear to be complementary withrespect to total sales. In particular, they found thatparticipation in one type of lottery is linked toincreased expenditure on other lottery products.The researchers argue that this is evidence of apositive consumption network externality acrosslottery games.

Looking at lotto games in Colorado, NewJersey, and Ohio, Grote and Matheson (2006)analyzed the effect on smaller state lotto games ofintroducing larger multistate games such as Mega

Alm, McKee, and Skidmore (1993) and Jackson, Saurman,and Shughart (1994).

10. The terms “complements” and “substitutes” are com-monly used in this literature to refer to whether sales ofone type of gambling supplement or come at the expense ofanother. Throughout this paper we use these terms in that con-text, and not in their more technical senses relating to therelationship between the price of one good and the demandfor another. That definition, however, does apply here, eventhough we are not modeling demand per se.

4 CONTEMPORARY ECONOMIC POLICY

FIGURE 2Annual Lottery Sales (Excluding Video Lottery Terminals) in Maryland and States Nearby, Fiscal

Year 1993–2013

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

1993

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2003

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2012

2013

No

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ales

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illio

ns)

Fiscal Year

Pennsylvania

New Jersey

Maryland

Virginia

Delaware

Data Source: LaFleur’s 2009 World Lottery Almanac, LaFleur’s Magazine, and State Lottery Annual Reports.

Millions and Powerball.11 Their key focus wason the state’s revenues from the different lotteryproducts. Their general finding was that, althoughthe introduction of the multistate games results inlower revenues from the smaller “pick” games,aggregate revenue from the two types of gamesincreases. Therefore, the addition of multistatelottery products generally will increase a particu-lar state’s net lottery revenues.

Using data from the U.K. National Lottery,Forrest, Gulley, and Simmons (2004) foundsimilar evidence that different types of lotteryproducts are complementary with respect tototal sales. In addition, these authors foundthat the introduction of a temporary lotteryproduct contributes to net sales. In contrast tothe above studies on lotteries, Trousdale andDunn (2014) focused on the price elasticityof demand for “online”12 lottery products inTexas. They found mostly substitute relation-ships among the different types of online lotteryproducts studied.

Of course, there have been other studies ofthe relationships among lottery products. As

11. In the next section, we describe the different typesof lottery products, specifically for Maryland. Many lotterystates have a “pick” game similar to Powerball or Mega Mil-lions but on a much smaller scale, in which 3 or 4 numbers aredrawn daily. The winning ticket must match these randomlydrawn numbers.

12. Games formerly called “online” are now usuallycalled “draw” games to avoid confusion with retail sales viathe internet.

above, however, most of the evidence from theliterature suggests that the different types oflottery products tend to be substitutes for oneanother, but that adding new types of games to thelottery menu results in an increase in total lotterysales.13

More closely related to the subject of thispaper are studies that have examined the relation-ship between lotteries and other forms of gam-bling, casinos in particular. Most of the availableevidence suggests there is some degree of can-nibalization between casinos and lotteries. Forexample, Elliott and Navin (2002) developed apanel-data model estimating state-level gross lot-tery revenues for all lottery states from 1989 to1995. Their findings indicated that casinos andparimutuel betting both caused reductions in statelottery revenues. They found that “each addi-tional dollar of revenue from riverboat gamblingreduces gross state lottery revenue by $1.38.”They estimate that a $1.00 gain in casino taxescauses a loss of 83¢ in lottery taxes, so that theintroduction of casinos only modestly increasesnet tax revenues from gambling.

Fink and Rork (2003) extended the work byElliott and Navin by taking into account the factthat when states legalize casinos they are makinga choice: states may introduce casinos because of

13. In a recent analysis of the lottery literature, Garrett(2016) raises a number of concerns about the aggregate dataand implicit assumptions typically used in studies that esti-mate lottery demand.

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 5

declining lottery revenues. There is then a poten-tial self-selection bias which might help explainthe negative relationship between casinos and lot-teries. Fink and Rork’s analysis, however, alsoindicated that casino tax revenues cannibalize lot-tery revenues. In particular, they found that a $1increase in casino tax revenues results in a 56¢decrease in lottery tax revenues. Thus, a con-sumer who spends $5 on casino games (resultingin about $1 in tax revenues for the state) wouldtypically spend $1.60 less on the lottery. Thiseffect of casinos on lottery sales is slightly largerthan that estimated by Elliott and Navin (2002).

Siegel and Anders (2001) tested the impactof Arizona tribal casinos on the state’s lotterysales, using monthly data from 1993 to 1998.Their findings indicated that the number of slotmachines had a significantly negative effect onlottery sales, but horse and dog racing had noeffect on the lottery. Specifically, their resultsindicated that “a 10% increase in slot machinesis associated with a 3.8% decline in [overall] lot-tery revenues and a 4.2% decrease in Lotto rev-enues” (p. 144). However, after making seasonaladjustments, these decreases dampened to 2.8%and 3.7%, respectively.

The most recent and comprehensive analy-sis of the general relationships among gamblingindustries is by Walker and Jackson (2008). Theyexamined state-level gambling industry data from1985 to 2000 for commercial casinos, lotteries,greyhound racing, and horse racing in all states.Their sample period included much of the earlycasino expansion in the United States. Their keyresult relevant to our study is that casinos havea negative impact on the lottery in states thathave both forms of gambling. Unfortunately, theWalker and Jackson analysis does not provideinformation on the degree to which increases inthe number or scale of casinos tend to reducelottery sales.

In addition to the academic papers discussedabove, there have been several consulting andgovernment reports that have addressed the rela-tionships between casinos and lotteries. Thesestudies can provide interesting anecdotal evi-dence. For example, Spectrum Gaming Group(2008) analyzed the expected impact of casinosin Massachusetts on the state’s lottery. As a partof their analysis, they calculated growth rates inpopulation and lottery revenues prior to and afterthe introduction of casinos in all casino states.They found that lotteries’ annual sales growthrates were 5.8% on average prior to casinos andonly 1.2% after their introduction.

By Pennsylvania law, the state’s LegislativeBudget and Finance Committee is required torelease annual reports that examine the impactof slot machines (and casino gambling generally)on the Pennsylvania State Lottery. This reporttypically includes recent data on lottery ticketsales and casino revenues, showing the trends ineach. Their 2013 report indicates that the growthrate of lottery sales in counties hosting casinosis lower than in non-casino counties. In fact, thegrowth rate of lottery sales in casino countiesis typically less than half that in the noncasinocounties (Pennsylvania Legislative Budget andFinance Committee 2013). These data suggestthat casinos negatively impact traditional lotteryticket sales, at least in areas close to casinos.

Recent evidence of a negative impact of casi-nos on lotteries has surfaced in other states aswell. For example, casinos began operating inOhio in 2012. A report by Bell (2013) indi-cated that the Ohio Lottery’s scratch-ticket salesdeclined by 4% in the first year of casino opera-tions, and other games also declined. However,government data show that Ohio lottery salesbegan increasing again in fiscal year 2014,14

which suggests that casinos may have just had aone-time negative impact on the lottery.

In considering the relationship between casi-nos and lotteries, the primary concern of policy-makers seems to be net tax revenues. Therefore,a key concern is the degree to which introducingcasinos might negatively impact lottery revenues.However, aside from increased tax revenues, thelegalization of casinos may also increase con-sumer surplus and reduce the deadweight lossesassociated with gambling taxes (Mason, Steagall,and Fabritius 1997). At the same time, however,the expansion of casino gambling may exacerbatethe social costs associated with problem gam-bling.15 Policymakers typically give much lessattention to these issues than to tax revenues.

Anecdotal and empirical evidence suggeststhat casinos harm lotteries, at least at the statelevel. There is, however, neither rigorous empiri-cal evidence in the literature on how individual

14. https://www.ohiolottery.com/SupportingEducation/Funding-Education/Revenues/

15. Several authors have emphasized the importance ofconsumer benefits from the legalization of casino gambling(Collins 2003; Crane 2006; Eadington 1996; Walker 2013).There is also a substantial literature on the social costs ofgambling; for examples, see Thompson, Gazel, and Rickman(1997) and Walker and Barnett (1999). Psychology researchsuggests that the prevalence of problem gambling has not beenvery sensitive to casino expansion in the United States (St-Pierre et al. 2014).

6 CONTEMPORARY ECONOMIC POLICY

TABLE 1Maryland Lottery Game Categories and Monthly Sales Statistics

GameCategory Description Examples of Games

Average Monthly Sales,ZIP Codea (SD)

MaxbMonthlySales, ZIP Codec

“Instant” Instant scratch-off ticketsd (various; scratch-off tickets) $106,822 (141,223) $1,112,400“Monitor” Games played on video

monitors; many timesper day, withassociated bonuses

Keno, Keno Bonus, Keno SuperBonus, Racetrax, RacetraxBonus

$109,958 (163,097) $1,433,065

“Pick” “Daily numbers” games Pick 3 Eve, Pick 4 Eve, Pick 3Mid, Pick 4 Mid

$114,298 (215,735) $1,907,317

“Multi-State” Large multistate lotterygames with associatedbonus games

Mega Millions, Megaplier,Powerball, PowerPlay

$40,276 (53,868) $712,196

aAverages are for the estimation sample, which encompasses the July 2009–February 2014 time period.bThe minimum monthly sales is zero for each game, as there is at least one ZIP code-month in the sample that did not have

a particular game at some point.cSome very small ZIP codes do not always have a lottery vendor available for all periods, so in these rare cases monthly

lottery sales data is zero for these ZIP codes. Other ZIP codes (such as the U.S. Naval Academy) never have a lottery vendor, sodo not enter the estimation sample.

dThe Lottery’s data regarding instant ticket pack “activations” are used as our measure of the sales of such games. Ticketactivations slightly precede actual sales by retail agents to the consumer, but are the best available measure of sales for ouranalyses.

lottery game sales react to casinos nor is thereany previous evidence regarding the effect ofcasino proximity on lottery sales. This informa-tion could be valuable for policymakers con-cerned with the net revenue effects of introducingor expanding casinos in lottery jurisdictions.

III. DATA AND METHODS

The Maryland Lottery, through its vendorScientific Games, provided us detailed monthlylottery sales data from July 2009 through Febru-ary 2014. There were 14 different types oftraditional lottery products available throughoutour sample period. We classify these data intofour different types of games, which accountfor over 97% of all lottery sales. Descriptionsof these four game categories are detailed inTable 1.16

We have monthly lottery sales data by gametype for each retailer in the state during oursample period. Thus, in the raw data we have238,208 retailer-level months of information for14 types of games, for a total of about 3.3 milliondata points.

Figure 3 illustrates Maryland’s total monthlylottery sales, which range from $120 to 183

16. We have omitted three Maryland Lottery games fromour study as too minor and erratic for reliable analysis. Theomitted games account for less than 3% of lottery sales.

million during our sample period, with an averageof around $145 million. In Figure 4, we showlottery sales by the game categories as shown inTable 1. “Instant,” “monitor,” and “pick” gamesaverage around $40 million each in monthlysales; “multi-state” (large lotto) games averagearound $15 million per month.

Examining Figures 3 and 4, it appearsthat a downward monthly trend may havebegun in early 2012 (Figure 3), caused primar-ily by declines in instant and monitor games(Figure 4).17

A. Data Aggregation

There is good reason to believe that the dif-ferent types of lottery games might have dif-ferent relationships with casinos. For example,the Maryland Lottery offers a Keno game whichis almost identical to the same game that isoffered at most casinos, including those in Mary-land. On the other hand, no casino game offersthe enormous jackpot size that one can win inPowerball and Mega Millions (multistate) games.We might therefore expect lottery games likeKeno to be impacted to a greater extent than

17. A review of individual graphs by lottery type bearsthis out. For the sake of brevity, we present all sales datain Figure 4, rather than showing a separate graph for eachtype. This presentation is admittedly crowded, but it ade-quately illustrates the declining revenues beginning aroundearly 2012.

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 7

FIGURE 3Maryland Lottery Total Sales per Month

$100

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ALL GAMES

FIGURE 4Monthly Lottery Sales, by Game Category

$0

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INSTANT

MONITOR

PICK

MULTI-ST

the multistate games, simply because casinosoffer a closer substitute to Keno than to themultistate games.

In order to identify the relationships betweencasinos and the different types of lottery productsoffered in Maryland, we analyze the lottery salesdata aggregated to the four game types shownin Table 1. As noted above, the lottery prod-ucts included in each category are similar. Forexample, Powerball and Mega Millions, the twokey games that comprise the “multi-state” gamescategory, are quite similar.

While lottery products are sold at more than4,000 locations in Maryland, the data are verynoisy at the retailer level. An additional compli-cation is that a majority of lottery products arepurchased at retail outlets that offer a wide vari-ety of other products, such as gasoline, cigarettes,and groceries. It is likely that a significant propor-tion of lottery purchases are either impromptu,or are secondary to a different product that thecustomer purchased at the retail outlet. There-fore, a retail location-level analysis is likely toconfound the relationship between casinos and

8 CONTEMPORARY ECONOMIC POLICY

lotteries with those between casinos and the vari-ety of other products sold at lottery retailers.18

Given these issues, and the fact that we are par-ticularly interested in the general impact of casinoopenings on lottery revenues, we perform theanalysis at the retailer ZIP code level. We selectedZIP codes because they are much more geograph-ically compact than counties or metropolitan sta-tistical areas in Maryland, but are not so small asto make unnecessary distinctions between retail-ers on opposite sides of the same street. Thus,our lottery sales data are aggregated by type ofgame and ZIP code. We use ZIP code census tractareas (which represent “populated” ZIP codes)provided by Easy Analytic Software, Inc. Thereare 461 such ZIP codes in Maryland, but only394 of these have lottery retailers, and thereforesales data.19 Summary statistics of the four gamecategories utilized in the analysis are shown inTable 1.

B. Distance in Travel Time

We calculated the travel time from each ZIPcode to each casino in Maryland, as well asto casinos in surrounding states. Given that thefocus of our analysis is how casino proximityaffects lottery sales, travel time is a better mea-sure of distance than simple mileage (either roadmiles or “as the crow flies”). This is because thetypical consumer appears more likely to focus ontravel time than on miles in deciding whether tovisit any casino at all, and if so, which casino tovisit.20 We assume that the geographic centroidof each ZIP code represents the location of thetypical resident of that ZIP code for measuringthe distance to casinos. Typical travel time wascalculated in minutes using Microsoft MapPoint

18. Our dataset does not include information on cate-gories of retailers that sell lottery products.

19. Some very small ZIP codes don’t always have alottery vendor available for all periods, so in these rare casesmonthly lottery sales are zero for these ZIP codes. Other ZIPcodes (such as the U.S. Naval Academy) never have a lotteryvendor, so do not enter the estimation sample.

20. A parallel is provided by the fact that virtually allGPS map applications (e.g., Google Maps, MapQuest, Waze)provide directions based on shortest travel time, althoughshortest distance in miles is typically an option that can bechosen. An additional issue arises in Maryland, as in manyother states. Although the largest of the casinos is located inan urban area, the others are all in rural areas. For example,the Rocky Gap casino is in the Rocky Gap State Park, andOcean Downs is in a rural area near a beach resort. Travel toand from these two casinos is much easier than travel nearMaryland Live or the Horseshoe Casino in Baltimore.

software, with manual checks via MapQuest andGoogle Maps.21

Our travel time variable takes a new value ifa new casino opens closer to a ZIP code thanexisting casinos.22 Therefore, in our model thedistance variable can either remain constant ordecrease as time passes. As an example, ZIPcode 21012 is located at and around Arnold, inAnne Arundel County. From July 2009 throughAugust 2010 (periods 1–14), the closest casinowas outside Maryland, about 70 minutes away,at Harrington Raceway in Harrington, DE. Thus,the travel time variable takes a value of 70 min-utes for periods 1–14. When the HollywoodCasino opened in Perryville in late September2010 (period 15), it became the closest casinoto ZIP code 21012, with a typical travel time of64.5 minutes.23 When the Ocean Downs casinoopened in Berlin in January 2011, it was not asclose to ZIP 21012 as the Hollywood Casino was,so the variable remains unchanged at the valueof 64.5. Table 2 details the changes from differ-ent casino openings on the number of ZIP codesimpacted and different measures of average traveltime. Overall, there is a meaningful amount ofidentifying variation, as over the course of thesample period studied the average travel time tothe nearest casino across all ZIP codes fell from72.4 to 40.7 minutes, and impacted 387 ZIP codesin our sample (typically several times each).

C. Methods

21. These services typically define the “centroid” of ageographic area in geographic terms. This will differ from thecentroid of the distribution of population, but for compact ZIPcodes such as Maryland’s, such differences are not material.The MapPoint software calculates travel time by exploringalternative routes, estimating travel time along each based ontypical (non-rush-hour) road speeds for each type of road, andthen selecting the minimum such travel time.

22. Some casinos opened in nearby states during theperiod we analyzed. These include the Greenbrier in WhiteSulphur Springs, WV, the Valley Forge Casino in King ofPrussia, PA, and the Nemacolin Resort in Farmington, PA.The first two were never the closest casino to any ZIP codein Maryland. The Nemacolin is several minutes’ travel timecloser to some ZIP codes, but opened less than 2 months afterRocky Gap. The most relevant out-of-state casinos for mostof the residents of Maryland are in Charles Town, WV, andthe three in Delaware, and these were all opened long before,and remained open throughout, our sample period.

23. In calculating the travel time to the closest casino forHollywood’s first (partial) month, we used a weighted averageof the old time and new time. For ZIP 21012 in period 15, thisvalue is 69.3, which reflects that the Hollywood was open fewdays in that month. For period 16 (October 2010), the casinowas open the full month, so the travel time takes a value of64.5 in that period and after, unless and until another casinoopens closer.

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 9

TABLE 2Casino Opening Dates, ZIP Codes Impacted, and Measures of Average Travel Time

Panel A

Casino, CityDate of

OpeningNumber of ZIPCodes Impacted

Average Change inTravel Time (minutes)

(Impacted ZIP Codes Only)

Hollywood Casino,Perryville

September 2010 208 −16.5

Ocean Downs, Berlin January 2011 26 −23.6Maryland Live!, Hanover June 2012 221 −30.0Rocky Gap,

CumberlandMay 2013 19 −50.5

Horseshoe, Baltimorea August 2014 — —MGM National Harbor,

Oxon HillaDecember 2016 — —

Panel BDistance Statistics: All ZIP Codes Average (minutes) Standard Deviation

Travel time 57.4 28.7Travel time (start of sample) 72.4 28.0Travel time (end of sample) 40.6 19.5

aThese casinos opened after our sample period (July 2009–February 2014).

Maryland is surrounded by states that alsosell lottery tickets and host casinos, with theexception of Virginia, which does not have casi-nos. As it is likely that most of Maryland’s lotteryticket sales are attributable to its own residents, amodel that mainly considers factors within Mary-land seems appropriate for explaining changes inlottery sales as casinos opened. To the extent thatcasinos and lotteries have a substitute relation-ship with each other, we would expect that thiseffect would be stronger in closer proximity tocasinos. We therefore utilize the following fixedeffects regression model as our baseline empir-ical approach to estimate the impact of casinoproximity on sales of each major type of lotteryproduct:(1)

SALES$it = f(γiy + μm + β1TTit + eit

).

In Equation (1), SALES$ is the total salesfor each type of lottery game investigated (e.g.,instant, multistate, etc.); subscript i denotes theZIP code, and t denotes year-month.

Our variable of interest is the effect of traveltime to the nearest casino on lottery sales. Intu-itively, the cost of travel should increase withtravel time. The impacts of such costs, however,should scale in proportion to relative changesin travel time. (i.e., a 10-minute difference willbe more meaningful to the typical consumerwhen it is, e.g., the difference between 10 and20 minutes vs. 60 and 70 minutes.) For thisreason, an estimation strategy that captures this

nonlinear relationship will likely provide a moreaccurate depiction of the true effects of changesin the relative distance to casinos on lotterysales. Moreover, there is no distance where thesize of the effect should begin to decline, hencethe log of travel time is the preferred approachbecause it has the advantage that it never reachesa maximum (or minimum) y value. So, vari-able TT is the natural log of the approximatetravel time from the nearest casino to the cen-troid of each ZIP code. Results are robust to alter-native nonlinear estimation approaches, as willbe demonstrated.

Month-specific fixed effects, denoted by μm,absorb seasonal differences in lottery sales acrossZIP codes, while γiy are ZIP code-by-year fixedeffects which absorb time-invariant differences inlottery sales across ZIP codes by year (includ-ing annual trends). This latter fixed effect con-trol is particularly important because it helpsaddress concerns that unobserved factors thatvary across ZIP codes over time, which alsoimpact lottery sales and are correlated with vari-ation in casino distance, may confound our dis-tance estimates and, hence, the interpretation ofour results.

All inference of Equation (1) estimatesis based on standard errors that have beencorrected to allow for nonindependence ofobservations from the same ZIP code throughclustering (Arellano 1987; Bertrand, Duflo, andMullainathan 2004).

10 CONTEMPORARY ECONOMIC POLICY

TABLE 3Estimates of the Impact of Casino Proximity on

Lottery Sales

Fixed EffectsRegressionModel: INSTANT MONITOR PICK MULTI-ST

Log travel time,in minutes

4,008.7*** 14,603.3*** 2,971.5*** 8,148.6***(1,312.2) (2,742.6) (844.3) (1,140.5)

R2 .986 .976 .996 .816

Notes: Robust standard errors clustered by ZIP code are in paren-theses. All regressions include ZIP code-year fixed effects and monthfixed effects. Sample size= 21,088 in all regressions.

* p< .1; ** p< .05; *** p< .01.

IV. RESULTS

A. Primary Outcomes

In Table 3, we present the primary outcomesfrom the fixed effects regression model. Resultsdemonstrate a positive and highly statisticallysignificant impact of distance to a casino on lot-tery sales across all four categories of lotterygames. However, because the effect is nonlin-ear in nature, relative proximity to the casinois very important to the size of the effect. Asan example, coefficient estimates on pick andmonitor-style games indicate that a new casinoopening which reduces the proximity to the near-est casino from 90 to 60 minutes (a 33% decline)for a certain ZIP code is estimated to reducepick and monitor game sales in that ZIP codeby approximately $1,200 and $5,900 per month,respectively.24 However, for the effect on an alter-native ZIP code which was initially 40 minutesaway from the nearest casino, this same 30-minute reduction (a 75% decline) would be esti-mated to reduce pick and monitor game salesin that ZIP code by approximately $2,100 and$10,000 per month, respectively.25 For perspec-tive, the average monthly monitor game salesin the representative ZIP code is approximately$110,000, so a decrease in sales of $5,900 rep-resents a permanent monthly decline in monitorgame sales of roughly 5.4%, while a reduction of$10,000 per month represents a 9.2% decline.

The same type of calculation was made for allthe game categories assuming the hypotheticalnew casino opens 45, 30, and 15 minutes awayfrom a representative ZIP code. In Figure 5 weillustrate the results, which are shown relativeto the benchmark in which the nearest casino

24. These results are found by calculatingΔy = [(β1 * ln([100 + p %]/100)] from the coefficient esti-mates in Table 3, where p% is the percent change in X. Forexample, Δy = [(14,603.3*ln([100−33.3]/100)]=−$5,914

25. See footnote 24 for reference.

is 60 minutes away. Results are shown in dollarand percentage terms from a baseline of averagemonthly sales. Since the estimated percentageimpacts affect each month that follows the open-ing of the hypothetical new casino, the percentchanges shown in Panel B of Figure 5 alsorepresent the long-term impact of a new casinoopening at various distances from the average ZIPcode. Overall, these results indicate that lotterysales will decline by meaningful amounts in theZIP codes immediately surrounding new casinos,as those casinos present an important alternativefor gambling dollars. Moreover, as casinos pro-liferate across the country, the impacts on lotteryrevenues nationally could be quite significant.

While all lottery game types demonstratethe same general negative relationship to casinoproximity, as demonstrated in the above example,the magnitude of the effect clearly varies acrossthe different games. The impact of casino prox-imity on monitor-style game sales, for example,is nearly five times as large as those of “pick”games. The differences in the estimated effectssuggest that the strength of the relationship thatexists between game types varies in importantways. Specifically, the large declines predictedfor monitor sales as casino proximity increasesis an intuitive finding, as monitor-style lotterygames (e.g., games played on video monitors)are very similar in experience to modern slotmachines found in casinos. These heterogeneousdifferences indicate that lottery revenues fromgames that are most similar to the types of gam-bling commonly found at casinos will be leastrobust to casino introductions. Nevertheless, thefindings shown in Table 3 and Figure 5 indicatethat casinos and all types of lottery productsdemonstrate a strong substitute relationship, andthat relative proximity impacts consumerbehavior, which subsequently impacts statetax revenues.26

26. Casinos that opened during the time frame underinvestigation vary in size and scope, and, as such, the magni-tude of the effects may vary from the average estimated effect(Table 3) because of these differences. While the objective ofthis study is to identify the nature of the relationship betweenlottery sales and distance to a casino on average, and to iden-tify what public finance tradeoffs are faced in these cases,we did undertake a casino-specific investigation to identifywhether larger effects are seen with larger casinos, ceterisparibus. Overall, the main distance estimate was very robust,but the results did show that the Maryland Live, which isthe largest casino in Maryland, did have a statistically largerimpact on lottery sales across all game types than the averagemeasured effect of other casinos. This result is intuitive, asbigger and more centrally located casinos should create larger“substitution” effects if the results presented in Table 3 areotherwise reasonable.

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 11

FIGURE 5Estimated Impact of a New Casino Opening on Monthly Sales in the Representative ZIP Code,

Relative to the Closest Casino Being 60 Minutes Away. (A) $ Impacts and (B) % Impacts

B. Robustness—Multistate Jackpots

Unlike other lottery games, multistate games,namely Powerball and Mega Millions, occasion-ally have enormous jackpots in the range of hun-dreds of millions of dollars, which generate agreat deal of national attention and media cover-age and appear to lead to “spikes” in the sales ofsuch games. Several of these spikes are illustratedin Figure 4. Moreover, the relationship betweenjackpot size and lottery sales is not likely lin-ear, but rather tends to demonstrate a threshold

effect. Specifically, jackpots get to a certain size,then sales increase dramatically, as attention toand excitement regarding the uncommonly largeprize grows. In looking at the data regardingjackpots and sales (shown in Figure 4), a jackpotthreshold of $300 million captures the sales spikepattern quite well; each of the large sales spikesin Figure 4 is associated with a jackpot of $300million or more.

These sales spikes are also notable becausethey seem to begin after the 2010 expansion in

12 CONTEMPORARY ECONOMIC POLICY

TABLE 4Robustness Models

Fixed Effects Regression Model: INSTANT MONITOR PICK MULTI-ST

Panel A: QuadraticTravel time, in minutes 297.4*** 678.2*** 205.2** 451.8***

(74.50) (144.4) (45.11) (59.14)Travel time squared −2.18*** −3.29*** −1.32*** −2.63***

(0.515) (0.950) (0.302) (0.385)Δ Sales evaluated at the mean of travel timea 47.0* (24.6) 300.6*** (51.5) 53.4*** (17.64) 150.5*** (20.9)Function turning point, minutes 68.2 103.1 77.7 85.9

R2 .986 .977 .996 .816Panel B: Inverse Distance

Inverse travel time, in minutes −208,405.5*** −368,998.7*** −86,067.1*** −210,687.0***(51,620.1) (105,247.8) (28,888.8) (36,858.3)

R2 .986 .976 .996 .815

Notes: Robust standard errors clustered by ZIP code are in parentheses. All regressions include ZIP code-year fixed effectsand month fixed effects. Sample size= 21,088 in all regressions.

aMean of travel time is 57.4 for this sample.* p< .1; ** p< .05; *** p< .01.

Mega Millions/Powerball in which states beganselling both products. As the timing of the mul-tistate lottery expansion potentially affects salesvolume in Maryland and corresponds generallywith the expansion of casinos in the state, it couldconfound estimated effects on multistate gamesales shown in Table 3. Hence, in order to inves-tigate the sensitivity of our findings to the pres-ence of large jackpots, we reestimated the modelson multistate game sales accounting for jackpotsize with the inclusion of a $300 million jackpotdummy. The estimates are very robust, indicat-ing that the impact of large jackpots on sales isnot confounding identification.27

C. Robustness—Alternative NonlinearSpecifications

In recognizing that the impact of a new casinoopening on local lottery sales will depend onhow far a particular ZIP code is from the newcasino, we have modeled the nonlinear relation-ship between distance and lottery sales by takingthe natural log of travel time. However, other non-linear approaches could have been selected. Inorder to confirm that our estimates are robust toother sensible choices, we reestimated our mod-els by defining the treatment variable in two alter-native ways.

In Panel A of Table 4, we begin by reesti-mating the initial models, but include both TTand TT-squared, instead of the natural log of

27. Distance (TT): Coefficient= 9,715, SE= 1,151; Jack-pot Dummy: Coefficient= 30,000; SE= 1,779.

TT . As indicated, results are very similar to ourinitial results for all four lottery game categories,indicating a strong positive relationship betweencasino distance and lottery sales. The resultsagain demonstrate that the impact of a change indistance is nonlinear, as the impacts are largerfor more proximate casinos. In particular, esti-mates from Table 4 suggest that the impact ona new casino opening 30 minutes closer wouldreduce sales of monitor-style games by approxi-mately $11,500 (or 10%) per month in a ZIP codethat had been 60 minutes away from the clos-est casino, but over $15,400 (14%) per monthin a ZIP code that was initially only 40 min-utes away.28 While the quadratic results suggeststronger effects for very proximate ZIP codesthan observed in Table 3, they also suggest thattravel time costs decline after some point, whichis nonsensical. Nevertheless, this investigationdemonstrates the robustness of the results inTable 3.

In Panel B of Table 4, we reestimate the ini-tial models utilizing a third nonlinear function oftravel time, the inverse of TT . Again the resultsare very similar, indicating that lottery sales arepositively related to distance to a casino. More-over, as shown in Table 3 and Panel A of Table 4,the magnitude of the relationship varies similarlyacross games types.

28. These results are found by calculatingΔy = [(β1 + (2 * β2 * (TT1 + TT0)/2)) * (ΔTT)] from thecoefficient estimates in Table 4, Panel A. For example,[(678.2+ (2*−3.29*45))*(30)]=−$11,463.

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 13

TABLE 5Estimated Annual Impact of Maryland Live! Casino Opening on Lottery Sales, by Game Type

INSTANT MONITOR PICK MULTI-STSUM ALLGAMES

Estimated casino impact (in millions $ per year) −$8.95 −$36.04 −$7.73 −$18.17 −$70.89Average travel time to nearest casino before

Maryland Live! opened (minutes, weighted bygame sales)

56.5 61.3 58.9 57.6 —

Average change in log travel time after MarylandLive! opening (weighted by game sales)

−21.3 −24.9 −24.9 −21.7 —

Average percent change in travel time afterMaryland Live! opening

−38% −41% −42% −38% —

D. Monetary Impacts

In an effort to provide a more specific pictureof the aggregate impact of a new casino on lot-tery sales, we estimate the total annual monetaryimpact on the lottery from opening one particularcasino—the Maryland Live, in Hanover. Mary-land Live is the largest casino in Maryland, it iscentrally located, and its opening impacted moreZIP codes than any other casino. Specifically,across all the ZIP codes in our sample that havelottery retailers, the average reduction in traveltimes to the nearest casino (weighted by ZIP coderevenue for each game type) fell by between 21and 25 minutes when Maryland Live opened inJune 2012. (The initial average distance rangedfrom 56 to 61 minutes away, varying slightly bytype of lottery game.)

We estimate the total annual impact of theMaryland Live casino opening on Maryland Lot-tery sales using the estimated baseline impactsfrom Table 3. As shown in Table 5, the esti-mated impact of the Maryland Live casino was adecrease in lottery sales of $71 million annually,with particularly large effects in both monitorand multistate games sales.29 A similar calcula-tion was done for each of the other casinos inMaryland operating during our sample period.(These estimates are presented in the Appendix,Table A1.) The estimated total negative impact ofall Maryland casinos on lottery sales is $103 mil-lion, or 5.9% of annual lottery sales.30

29. To calculate the estimated effect, we multiply thelog of one hundred plus the average percent changein travel time for each game, by the coefficient esti-mate for travel time from Table 3, then multiply by394 ZIP codes, and multiply by 12 months. Specifically,[(β1 * ln([100 + pbar %]/100) * (394) * (12)], where pbar% isthe average percent change in travel time across all ZIP codes(including those where TT is unaffected).

30. This estimate is based on fiscal year 2013 lottery salesof about $1.75 billion. This effect does not include the impact

Extrapolated over time and across all casinos,these results suggest that meaningful changesoccur in gaming behavior among lottery play-ers and therefore in total lottery revenues injurisdictions that open casinos. These effectsare typically unaccounted for in state govern-ments’ preliminary analyses of casino impacts,which often overestimate the revenue streamsfrom gambling of all types.

V. DISCUSSION AND CONCLUSION

In this paper, we have addressed both pub-lic finance aspects of the relationship betweencasinos and lotteries, as well as consumer behav-ior issues related to the substitutability and com-plementarity of spending on different types ofgambling. State governments legalize gamblingin order to raise tax revenues, and indeed, thegambling industry is typically taxed at relativelyhigh rates. One obvious concern for policymak-ers is the net impact on state tax revenues fromthe introduction or expansion of casinos, with“cannibalization” of lottery revenues being a keyconcern.31

Our results support earlier, more generalstudies that have found a negative (substitutive)relationship between spending at casinos and onlotteries. We find strong evidence of a negativeimpact of casinos on lottery sales, and that impactincreases with casino proximity. For example,if a new casino opens 15 minutes away from aparticular ZIP code, when previously the closestcasino was 60 minutes away, we estimate that

of the two casinos that opened after our sample period, thatis, the Horseshoe (Baltimore) and the MGM National Harbor(Oxon Hill).

31. This issue arose recently, for example, in several ofthe hearings held in Georgia during 2015 in considerationof casino legalization there. See http://www.house.ga.gov/Committees/en-US/Preservation_of_Hope.aspx.

14 CONTEMPORARY ECONOMIC POLICY

multistate game sales in that ZIP code woulddecline by 28% (see Figure 5). Summing acrossall the nearby affected ZIP codes, the new casinocould have a large negative impact on lotterysales in the area, especially for casinos located inmore heavily populated areas.

If we consider the impacts of casinos on lot-tery sales aggregated to the state level, how-ever, we find only a modest impact. For example,we estimate that the largest casino in Maryland(Maryland Live) negatively impacted total lot-tery sales in the state by approximately $71 mil-lion per annum. Given that annual lottery salesin Maryland are about $1.75 billion, the nega-tive impact of casinos on lottery sales in Mary-land is important, but not overwhelming. On net,the gaming tax revenue effect of opening Mary-land Live is certainly positive. During 2015 thecasino attracted $625 million in total gaming rev-enue, and it paid roughly $270 million in taxesto the state (Maryland Lottery and Gaming Con-trol Agency 2015).32 The casino has clearly ledto a net increase in the state’s overall gamblingtax revenue, despite its modest negative impacton tax receipts from lottery sales.

In addition to the public finance issuesaddressed, our paper also provides some inter-esting insight regarding consumer behaviorvis-à-vis gambling. Overall, the results indicatethat casinos and lotteries have a substitutiverelationship, and that relative proximity impactsconsumer behavior in intuitive ways. Notably,Maryland is somewhat unique in its offering ofmonitor-style lottery games, such as Racetrax

32. During 2015 the tax rate on slot machine revenueswas 67%, and on table games it was 20%. Slot machinesproduced about 63% of the casino’s gross revenues.

and Keno. Racetrax is a unique game, withnothing similar offered at Maryland’s casinos.Keno, in contrast, is offered at most casinos, andcustomers can play the lottery’s Keno game athome on their computer. Both monitor productsare relatively fast-action games, with high eventfrequency, similar to a typical casino game.33

Intuition might therefore suggest a stronger neg-ative relationship exists between casinos and thelottery’s monitor games. Indeed, we find thesegames are impacted a great deal by changes incasino proximity.

We believe this is the first paper to estimatethe impact of casino proximity on lottery salesby lottery game type. Although we find a nega-tive relationship between casino games and thevarious types of lottery products in Maryland,the results could be different in other jurisdic-tions, depending on the regional economy, con-sumers’ cultures and preferences, the nature ofthe local casino industry, and other factors. Forexample, in a jurisdiction with modest lotterysales, the negative impact of large or ubiqui-tous casinos on lottery sales could be devastat-ing. Conversely, a “destination resort” in a remotearea of a large state might have a much smallerimpact on the state’s lottery sales. Nevertheless,our results generally indicate that the introduc-tion of casinos may increase net gambling taxreceipts to a lesser extent than the gross casinotax receipts themselves. Future research in otherjurisdictions could provide valuable evidence onthe extent to which these findings are generaliz-able beyond Maryland.

33. In the gambling literature, “event frequency” refers tothe number of bets that can be completed during a particularamount of time. For more details, see Parke and Griffiths(2006). A high event frequency implies a very short waitbetween placing the bet and learning the outcome. Amongcasino games, slot machines typically have the greatest eventfrequency. “Instant” games hold a similar position amonglottery products.

CUMMINGS, WALKER & COTTI: CASINO PROXIMITY AND LOTTERY SALES 15

APPENDIX

TABLE A1Estimated Annual Impact of All Maryland Casino Openings on Lottery Sales, by Game Type

Panel A: Hollywood INSTANT MONITOR PICK MULTI-ST ALL GAMES

Estimated casino impact(in millions $ per year)

−$4.30 −$12.46 −$3.28 −$7.77 −$27.81

Average travel time tonearest casino beforeHollywood opened(minutes, weighted bygame sales)

70.9 75.1 75.0 70.6 —

Average change in logtravel time afterHollywood opening

−14.4 −12.4 −15.6 −12.9 —

Average percent change intravel time afterHollywood opening (%)

−20 −17 −21 −18 —

Panel B: Ocean Downs INSTANT MONITOR PICK MULTI-ST ALL GAMES

Estimated casino impact(in millions $ per year)

−$0.23 −$1.33 −$0.12 −$0.53 −$2.22

Average travel time tonearest casino beforeOcean Downs opened(minutes, weighted bygame sales)

56.9 63.0 59.5 58.1 —

Average change in logtravel time after OceanDowns opening

−0.7 −1.2 −0.5 −0.8 —

Average percent change intravel time after OceanDowns opening (%)

−1 −2 −1 −1 —

Panel C: Maryland Live! INSTANT MONITOR PICK MULTI-ST ALL GAMES

Estimated casino impact(in millions $ per year)

−$8.95 −$36.04 −$7.73 −$18.17 −$70.89

Average travel time tonearest casino beforeMaryland Live! opened(minutes, weighted bygame sales)

56.5 61.3 58.9 57.6 —

Average change in log traveltime after Maryland Live!opening

−21.3 −24.9 −24.9 −21.7 —

Average percent change intravel time after MarylandLive! opening (%)

−38 −41 −42 −38 —

Panel D: Rocky Gap INSTANT MONITOR PICK MULTI-ST ALL GAMES

Estimated casino impact(in millions $ per year)

−$0.44 −$0.78 −$0.08 −$0.99 −$2.28

Average travel time tonearest casino beforeRocky Gap opened(minutes, weighted bygame sales)

35.2 35.8 34.1 35.6 —

Average change in logtravel time after RockyGap opening

−0.8 −0.4 −0.2 −0.9 —

Average percent change intravel time after RockyGap opening (%)

−2 −1 −1 −3 —

Panel E: All Casinos INSTANT MONITOR PICK MULTI-STALL GAMES

ALL CASINOS

Estimated casino impact (inmillions $ per year)

−$13.92 −$50.61 −$11.21 −$27.46 −$103.20

16 CONTEMPORARY ECONOMIC POLICY

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