Measuring the Local Impact of Electronic Gaming Machines

Melbourne Institute Working Paper No. 13/02

Date: 2002

Author(s):

David Johnson

Abstract

Recent growth in the utilisation of Electronic Gaming Machines (EGMs) has led to community disquiet about attendant problems of alleged loss of community standards, problem gambling and losses by retailers and other local businesses. Recent legislation provides an opportunity for local councils to object to any proposals to increase numbers of EGMs on the grounds of social and economic impact on the local community. The Pokie Application Research Kit (PARK) is a software tool that aims to help local councils determine the local social and economic impact of the introduction of additional EGMs to venues within their boundaries. PARK evaluates the benefit of additional EGMs by tracing the way in which expenditures on EGMs feed, or do not feed, into the local economy. If expenditures do feed through to further local economic activity there is a benefit for the local economy. If the expenditures accrue to agents who repatriate them outside the local economy there is no benefit for it. In such a circumstance the expenditure is said to be 'leaked'. The PARK model compares the situation that would arise with additional expenditures on EGMs with the status quo. In operationalising the comparison a number of crucial assumptions are required, the most important concerning 'leaked' expenditures. The analysis finds the results are very sensitive to these assumptions and the current structure of the model predisposes it to show large net losses from the introduction of additional EGMs. Alternative approaches to measuring the local economic impact of increasing the number of EGMs and the role of local economic impacts in the broader public policy debate are discussed in the paper.