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Institute for the Study of Gambling and Commercial Gaming-025

College of Business Administration
Reno, NV 89557-0208

Phone: (775) 784-1442
Fax: (775)784-1057

University of Nevada, Reno
Maintained by: Judy Cornelius
corneliu@unr.nevada.edu
Last Modified: 12/04/2002

Mark W. Nichols and B. Grant Stitt, University of Nevada, Reno;
David Giacopassi, University of Memphis

(Funded by the National Institute of Justice, Grant No. 98-IJ-CX-0037)

This study examines personal bankruptcy in eight communities in the United States that recently adopted casino gambling. The eight communities are Sioux City, IA; St. Joseph, St. Louis City , and St. Louis County, MO; Alton, Peoria, and East Peoria, IL; and Biloxi, MS. All the communities have had casino gambling for at least four years but less than ten years. Bankruptcy rates in the eight communities were compared to bankruptcy rates in eight non-casino control communities. The control communities were chosen based on their similarity to the casino communities matched on 15 demographic, social, and economic variables. Comparisons of bankruptcy rates were based on county-level data for personal bankruptcy, both Chapter 7 and Chapter 13, which were analyzed for 1989:Q4 through1998:Q1.

The results indicate that casino gambling is associated with an increase in personal bankruptcy in seven of the eight communities. In five of the seven communities the increase is statistically significant. The most significant changes in bankruptcy occurred among Chapter 13, as opposed to Chapter 7, filings. The results also tend to suggest that there is a direct and positive relationship between length of time casinos have been in a community and bankruptcy rate, as those communities that have had casinos the longest tended to have the greatest increase in bankruptcy. However, the study shows that an increase in bankruptcy rate is not an inevitable product of casinos opening in a community. One community (Biloxi/Harrison County, MS) actually experienced a significant decrease in bankruptcy rate.

It is speculated that the decrease in bankruptcies in Biloxi is due to the nature of the community and the casino industry within the community. Biloxi is the only casino jurisdiction with a high concentration of casinos and the only destination resort of the eight communities studied. Destination resort casinos attract a greater percentage of their clientele from tourists. As a result, the economic benefits--job creation, tax revenue, economic benefits to other businesses--are greater due to the influx of visitors to the community. In this type of environment, the creation of jobs and income may allow people to better meet their financial obligations, outweighing any negative effects created by excessive gambling on the part of community residents.