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Casinos More Often Lead to Losses than to Economic Development

All that glitters is definitely not gold when it comes to casinos. In a special gambling issue of the journal Managerial and Decision Economics, two economists describe their recent analysis of the costs and benefits associated with introducing a casino to a community. Although many officials have promoted casinos as a means to support lasting economic development, Earl Grinols of the University of Illinois at Urbana-Champaign and David Mustard of the University of Georgia concluded the opposite. They found that the costs outstripped the gains almost twofold¿an imbalance that amounts to a national loss of at least $27.5 billion each year.

"Much of the information has been funded by the gambling industry itself," Grinols says, "and is marked by poorly executed or biased economic-impact studies that use incomplete data or make conclusions not supported by facts." Very often, calculations wrongly include the tax receipts and wages from a casino without also taking into account the establishment's effect on other businesses, from whom they drain revenue.

Also underestimated, Grinols and Mustard say, are the social costs. Two-thirds to 80 percent of gambling revenues come from just 10 percent of the population. But among this group, one in five files for bankruptcy and 21 to 36 percent gets fired from their job. These pathological gamblers take "a predictable path of exhausting personal resources, selling insurance policies, selling possessions and 'borrowing' from family and friends" to the tune of $13,586 a year. So too, crime rates are approximately eight percent higher in counties with casinos at least four years old.

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