Do Slot Machines Cause Bankruptcy? A Regulatory Natural Experiment with Exogenous Changes to Slot Locations

Ackerlof and Shiller (2015), and many others, argue that slot machines are manipulative and deceptive. We examine whether the removal of slots from a specific bar or restaurant impacts bankruptcy filings in the immediate vicinity. Our identification strategy compares consumers that are fractions of a kilometer from the closed slot location, compared to consumers slightly further away. We find that the removal of slots from a bar or restaurant significantly reduces the number of neighboring bankruptcies. These effects are dependent on the dollar amount of gambling removed from each location, as well as the distance from the location.