Will the Arkansas lottery have a positive economic impact?
by June 18, 2009 9:52 am 63 views
The debate as to the economic impact of Arkansas’ new state lottery contains several angles and caveats, according to a report by Roby Brock at TalkBusiness.net.
Revenue projections for Arkansas’ new state lottery range from $100 million a year on the conservative side to $400 million annually on the liberal side. But it’s not certain the lottery activity will enlarge Arkansas’ economic pie, so to speak.
Dr. Tom Garrett, an economist with the Federal Reserve Bank in St. Louis, is skeptical that the impact will be noticeable, Brock notes in his report.
“The lottery will have little impact, if any, on the overall Arkansas economy. … Basically, the lottery is a new consumption alternative, so people will spend their money on the lottery instead of other things, such as movies, restaurants, and other entertainment. It is simply a reallocation of spending dollars by Arkansans,” Garrett explained.
Jeff Collins, an economist with StreetSmart Data in Springdale, agrees with Garrett, but thinks that an intriguing aspect to follow – if possible – is what happens with lottery winnings.
Suppose a lottery player wins $500. Would they spend more freely than if they received an extra dollar a day for 500 days?
“Economic theory would suggest the answer in short is ‘yes.’ The economic impact resulting from those expenditures on the state depends on if the winner spends at the local Wal-Mart or drives over to Tunica to try to double their winnings,” Collins said.
While Garrett, Collins and other economists contacted for this story agree that there will be little, if any, new wealth created by lottery ticket sales, the story could be different if Arkansas is able to attract out-of-state people to play.
“The dollars from out-of-state players is new money to the state of Arkansas, but my guess is that ticket sales in Arkansas from out-of-state players will be a small percentage of the total sales,” Garrett said.
“It is the recapture of lost economic activity that is the greatest immediate benefit from enacting a lottery,” contends Collins, who also notes that the benefit gets smaller and smaller the longer the lottery is in place.
Link here to Brock’s more detailed report.