Author

Wei Bao

Date of Award

5-2013

Degree Type

Report

Degree Name

Master of Science (MS)

Department

Applied Economics

First Advisor

Man-Keun Kim

Abstract

This paper presents an approach to investigate the statistical relationship among casino activities, crime rates and number of visitors in Las Vegas, NV. Numerous studies have attempted to answer the question whether casino gaming increases crime rates. Casino gaming is statistically correlated with more crimes when researchers use the reported crime rate, i.e., ratio of the number of crimes to local population. However, there is no statistical relationship between the two when researchers use the visitor adjusted crime rate (henceforth adjusted crime rate), i.e., ratio of the number of crimes to local population and visitors, in their analyses. Somewhat surprisingly, previous studies have failed to consider the endogeneity issue, i.e., coincidental impacts of casino activities and crimes. This paper addresses endogeneity among variables by estimating the impact of casino activities on crimes and also impact of crimes on casino activities. To deal with endogeneity, a system of three equations representing casino activities, the number of visitors, and visitor adjusted crime rates is estimated using three stage least squares.

Elasticity of the casino revenue with respect to the adjusted crime rate is estimated to be +-0.22+-0.1 and elasticity of the adjusted crime rate with respect to casino revenue to be 0.29+-0.27. In addition, using the regression of the personal income on the casino revenue in Las Vegas, the impact of the adjusted crime rate on the regional economy is estimated. Results show that one percent increase in crime leads to cumulative decreases in the personal income by $105+-$44 per household per year.

Policy implications based on findings in this research are i) efforts to reduce crime can be effective tool to boost the regional economy (in Las Vegas), ii) cutting the link between casino gambling and crime is important; to cut the link, pay more attention on education or regulation to reduce pathological gamblers, usurious loans and the fraud related to casino gambling, and iii) improving the image of casino gambling that are related to crimes and thus attracting more visitors.

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