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Jonathan Rork and Stephen Fink
''The Importance of Self-Selection in Casino Cannibalization of State Lotteries''
( 2003, Vol. 8 No.10 )
This note extends the work of Elliott and Navin (2002) on the substitutability of commercial casinos and state lotteries by controlling for a potential negative selection bias. We utilize a Heckman two-step selection correction in which our first stage probit involves whether or not a state has legalized commercial casinos. Results indicate that a $1 increase in state casino tax revenue will reduce net lottery proceeds by $0.56. This estimate is 33% smaller than what has been found in other studies, which is consistent with a negative selection bias.
JEL: H7 - State and Local Government; Intergovernmental Relations: General
Manuscript Received : May 18 2003 Manuscript Accepted : Sep 16 2003

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