An empirical analysis of German casino locations

In this paper we provide an empirical analysis of German casino locations. Due to the "mercantilistic background" of casinos, we assume that casinos are more likely to be found at borders and tourist areas. Although the location decision has been made in the past, we use cross-sectional data at county level to analyze whether the current locations of casinos are consistent with current policy objectives. We discuss whether fiscal incentives and/or regulatory objectives to prevent harmful gambling are relevant for the locations of German casinos. For our empirical analysis we use location and tourism indicators which are both significant factors for the location of German casinos. We find that the likelihood of a casino location increases if a county is located on a state border. We conjecture this is due to the following reasons: On the one hand there is increased out-of state demand on borders and on the other hand negative externalities of a casino can be shared with neighbor states. This is inconsistent, however, with the objectives of the State Treaty, which is to provide legal gambling opportunities for the population within the state. For better implementation of the objectives, a more balanced distribution of casinos throughout the urbanized regions in Germany is recommended.