Impact studies, cost-benefit analysis and casinos

The simplest forms of impact analysis treat a prospective casino facility as an entirely new source of demand in a region, while completely ignoring the character of supply responses. Such approaches cannot be used to estimate the net benefits of a casino. On the demand side they fail to consider the displacement of other local goods and services, while on the supply side they ignore the fact that most workers have real opportunity costs in the form of alternative employments either inside or outside the region. While various studies have attempted to address the displacement issue, virtually none have looked seriously at the opportunity cost of labor. Evidence suggests that such costs are large. An estimate presented here for Chicago sets these costs at 45% of casino and related labor income.