The Impacts of Gaming Expansion on Economic Growth: A Theoretical Reconsideration |
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Authors: | Guoqiang Li Xinhua Gu Ricardo Chi Sen Siu |
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Institution: | (1) Economics and International Finance, Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Av. Padre Tomas Pereira, Taipa, Macau, China |
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Abstract: | This paper employs a general equilibrium framework to analyze the effects on economic growth of global expansions in casino
gaming, which exports gambling services largely to non-residents. Both domestic and foreign investments in the gaming sector
bring in not only substantial revenues but also positive spillover effects on related sectors and even on the entire local
economy. However, an over-expansion of commercial gambling may lead to deterioration in the terms of trade with an adverse
impact on real income. If this situation persists, it would not be impossible for immiserizing growth to occur. As a highly
profitable sector, casino gaming may enable its operators to diversify out of this risk if they invest retained profits in
non-gaming sectors to cash in on the spillover effects it has created. The gaming-dominant economy can then be directed on
a more balanced and sustainable growth path, and will become less susceptible to business cycles. Indeed, economic experiences
in the world’s major casino resorts are consistent basically with this argument for diversification. We believe that after
the current global crisis fades away, economic growth and resulting surges in global demand for gambling services can provide
further opportunities for the expansion of existing casino resorts and the development of new gaming markets. |
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