Does Gambling Complement the Tourist Industry? Some Empirical Evidence of Import Substitution and Demand Displacement

Abstract

Gambling is intuitively considered as part of the tourism ‘package’. This paper empirically assesses this perception in the context of actual casino development in Indiana and simulated impacts of a hypothetical casino in Israel. In both contexts, the sources of demand for gambling, the extent to which these are ‘tourist’ sources and the question of gambling-generated demand displacing existing tourist demand, are examined. Despite the rather different market and political contexts in Indiana and Israel, the findings on the gambling-tourism relationship and the effect of gambling on local economies, are remarkably consistent. In both cases, gambling is seen to be grounded in import-substitution rather than pure ‘export’ activity. Additionally, in both cases there is evidence that the introduction of gambling displaces tourist demand. The policy implications of these findings point to the need to differentiate between local and national impacts of gambling and between the local fiscal and local economic development impacts.