Do Slot Machines Cause Bankruptcy? Spatial Difference in Difference Evidence
Session Title
Session 2-3-B: True or False: “The Real Problem Is Not Whether Machines Think—But Whether Men Do” (B.F. Skinner)
Presentation Type
Event
Location
The Mirage Hotel & Casino, Las Vegas, Nevada
Start Date
8-6-2016 2:00 PM
End Date
8-6-2016 1:30 PM
Disciplines
Behavioral Economics | Economics | Statistics and Probability | Substance Abuse and Addiction
Abstract
This is the first study to provide causal evidence on the impact of slot machines on individual consumer bankruptcy filings, using recent econometric techniques designed to identify causality. We exploit very detailed administrative data from Alberta, Canada, on the location of the universe of slot machine locations, and administrative data on the location of universe of individual bankruptcy filers.
Specifically, we compare the impacts on neighborhood bankruptcies of a bar or restaurant with a large amount of gambling removing its slot machines, compared to a bar or restaurant with a small amount of gambling removing its slot machines. We exploit our ability to observe the total dollar magnitude of gambling at every bar and restaurant.
In order to control for unobservable neighborhood characteristics, we use the spatial difference in difference econometric methodology. This methodology differences out unobservable neighborhood characteristics by comparing bankruptcy filers that are fractions of a kilometer (radii of 0,25 km, 0.5 km and 0.75 km) from the specific bar or restaurant, compared to bankruptcy filers slightly further away (radii of 1.5 km, 2.0 km and 2.5 km).
We find that a 1% increase in total dollars gambled in the year prior to the removal of slots from the specific bar or restaurant, causes a 1% to 3% reduction in bankruptcy filers two years after the closure of that slot machine location. These effects are much larger for very close neighbors of the slots location (0.25km) compared to neighbors slightly further away (0.5 km and 0.75 km).
Keywords
Slot Machines, Bankruptcy, Causality
Streaming Media
Do Slot Machines Cause Bankruptcy? Spatial Difference in Difference Evidence
The Mirage Hotel & Casino, Las Vegas, Nevada
This is the first study to provide causal evidence on the impact of slot machines on individual consumer bankruptcy filings, using recent econometric techniques designed to identify causality. We exploit very detailed administrative data from Alberta, Canada, on the location of the universe of slot machine locations, and administrative data on the location of universe of individual bankruptcy filers.
Specifically, we compare the impacts on neighborhood bankruptcies of a bar or restaurant with a large amount of gambling removing its slot machines, compared to a bar or restaurant with a small amount of gambling removing its slot machines. We exploit our ability to observe the total dollar magnitude of gambling at every bar and restaurant.
In order to control for unobservable neighborhood characteristics, we use the spatial difference in difference econometric methodology. This methodology differences out unobservable neighborhood characteristics by comparing bankruptcy filers that are fractions of a kilometer (radii of 0,25 km, 0.5 km and 0.75 km) from the specific bar or restaurant, compared to bankruptcy filers slightly further away (radii of 1.5 km, 2.0 km and 2.5 km).
We find that a 1% increase in total dollars gambled in the year prior to the removal of slots from the specific bar or restaurant, causes a 1% to 3% reduction in bankruptcy filers two years after the closure of that slot machine location. These effects are much larger for very close neighbors of the slots location (0.25km) compared to neighbors slightly further away (0.5 km and 0.75 km).
Comments
Audio recording of this presentation is attached as a downloadable MP3 audio file, 33.1 MB