CASINOS, HOTELS, AND CRIME

I. INTRODUCTION In recent decades, casinos have spread to many states in which they had previously been illegal. Nevada legalized casino gambling in 1931. In having legal casinos, it remained alone among the states until New Jersey legalized Atlantic City casinos in 1976. Recently, a total of 12 states have allowed commercial casinos (American Gaming Association, 2009). Other states have allowed gaming devices at racetracks. Following action by the U.S. Supreme Court in 1987 and the Congress in 1988, Native American casinos have opened in 28 states (American Gaming Association, 2009). This spread of casino gaming has been very controversial. The public, regulators, and researchers in health and social sciences have been interested, among other things, in the effects of casino gambling on crime. A few researchers have empirically investigated the connection between the opening of new casinos and local area crime rates. Two of the most important of these are Evans and Topoleski (2002) (E&T) and Grinols and Mustard (2006) (G&M). (1) Using a large panel of U.S. county data on casino openings and crime rates, G&M test the hypothesis that casinos cause crime. They estimate the parameters of a fixed-effects panel model using all 3,165 U.S. counties for the period 1977 through 1996. Their dependent variables are numbers of reported offenses in each of the following seven categories: aggravated assault, rape, robbery, murder, larceny, burglary, and motor vehicle theft. The source for these crime rates is the Federal Bureau of Investigation's (FBI) Uniform Crime Reporting (UCR) program, which the Interuniversity Consortium for Political and Social Research (ICPSR) makes available to researchers. (2) G&M find that casino openings cause county crime rates in all categories except murder to rise after a lag of a few years. E&T also use UCR data to estimate a similar model to test the effects of opening Native American casinos on county crime rates. They find statistically significant positive lagged effects of new Native American casinos on crime. In this paper, I reexamine the link between new casinos and crime rates. Here, I use the 92 counties of Indiana over the period 1994 through 2004. During this period, Indiana opened its first commercial casinos, including 10 casinos in seven counties. (Indiana has no Native American casinos.) Also, Indiana's casinos have a readily available measure of casino activity, the turnstile count of patrons, which we can use in addition to the often used dates of casino opening. Finally, I have created a database of the number of hotel rooms for each Indiana county for each of these years. I add this variable to the crime equations. The annual series of data on hotel rooms by county allows a test of whether or not the opening of other public accommodations besides casinos, specifically hotels, affects crime rates. II. THEORY OF CASINOS AND CRIME The economic model of crime proposed by Becker (1968), and investigated by Ehrlich (1973), Sjoquist (1973), Cornwell and Trumbull (1994), Raphael and Winter-Ebmer (2001), Gould, Weinberg, and Mustard (2002), Levitt (1998, 2004a, 2004b), Ihlanfeldt (2006), and many others asserts that potential criminals are utility maximizing agents who allocate time between legal work and crime based on the potential benefits and costs of each. (3) To the extent that this is true, increasing the opportunity cost of criminal behavior would reduce crime. Increasing the probability of arrest and conviction along with more severe penalties would increase the opportunity cost of crime. Also, increasing legitimate work opportunities for potential criminals or the wages for that work would increase the opportunity cost of crime. As explained below, this theory has testable implications for the link between new casinos and crime. Following the economic model of crime, new casinos could either increase or decrease local crime rates. …