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Tuesday, April 20, 2010

Casinos and Crime Rates

William Reece has published* an extraordinarily detailed analysis of the relationship between the opening of casinos and crime rates, using a unique data set for Indiana, much of which (especially the data on hotel rooms by county) he constructed. As he notes, determining what we would expect the relationship between casinos and crime rates is difficult to determine:

"Following the economis model of crime, new casinos could either increase or decrease local crime rates. If introducing new casinos creates job opportunities in the area, new casinos could, by increasing the opportunity cost of crime, reduce crime rates. Also, increasing activity within existing casinos could have the same effect...The economic model of crime [also] suggests that colser proximity of potential criminals and potential victims would increase local crime rates...lowering transportation costs between potential criminals and victims...increases crime rates..." (p. 146)

What he finds may be disconcerting for advocates of casinos as a tool for economic development. For several classes of property crimes (larceny, burglary, and robbery), crime rates rise significantly over the five years following the opening of a casino. Thefts of motor vehicles apparently rise in the first year, but then experience no significant change in the following years. So it appears that casinos do, on balance, lead to increaed rates of property crimes.

On a more hopeful note, assault rates apparently fall in the five years following the opening of casinos, and the incidence of rape is apparently unchanged. (These results are derived from his Table 2, on p. 153, and Table 3, on p. 155.)

But--and, casino supporters, take note--he also finds that greater casino activity (not openings), as measured by the number of casino patrons (using turnstile counts) is associated with lower crime rates. This suggests that, as the economic activity associated with casinos increases, crime falls.

There are many ways to view this, including the classic economist's call for additional research. My own take is that, at present, it's hard to conclude that casinos have a significant effect, either as factors leading to increases in crime rates, or as opportunities leading to reduced incentives for crime.

*William S. Reece, "Casinos, Hotels, and Crimes," Contemporary Economic Policy, V. 28, N. 2, April 2010, pp. 145-161.


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