Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Historical Impact of Recessions on Gambling Activity

Economics / Gambling Feb 08, 2020 - 03:53 PM GMT

By: Submissions

Economics

The United States continues to reap benefits from the burgeoning gambling industry. This is evident from the personal consumption expenditures from the three main types of gambling, i.e. pari-mutuel wagering, casino gambling, and lottery.

For instance, in 1996, the personal consumption expenditure stood at $50.291 billion but doubled to $109.260 billion in 2007. In 2018, the figure rose to a jaw-dropping $142.553 billion. While this may be a good trend, the industry, just like any other, isn’t recession-proof. Or is it?

In this article, we’ll take a look at the impact of recession on gambling activities, especially when it comes to the economy and overall finances.


Gambling Revenue and Recession

From 1998 to 2007, the gambling industry enjoyed a significant and steady increase in revenues. The figures stood at 2.1% to 2.5% for revenues from states where gambling was legal. This was close to a decade, and from this steady rise, everyone expected the gambling revenues to continue rising.

The US would have reaped more from gambling had it not passed the PASPA act of 1992. This encouraged an initial surge in offshore gambling with over $40 billion spent online on offshore betting sites. In 2017, this figure blew to $150 billion every year. While a sizeable share returned to the country, a huge chunk remained offshore.

Nevertheless, after a prosperous 9 years for the gambling industry, things took a turn for the worst when revenues started declining in 2008. As you may have guessed, this was the same year when the infamous 2008 financial crisis hit the US.

The recession caused a 4.7% dip in commercial casino revenues to stand at $107.215 billion. The decline in revenues started in February and went downhill every month from then compared to a similar period the previous year. The downward spiral continued into the first few months of 2009.

This sudden decline in revenues in the gambling industry during the recession led to several studies looking to uncover how recession affects gambling activities.

How Recession Affects Gambling Activities

As is the norm during a recession, many companies take several measures to reduce expenditure. One of the most severe measures taken is cutting off employees. For the lucky ones, they may get away with salary or wage cuts.

With reduced or no income at all, people tend to reduce their expenses and this includes gambling expenses. The uncertainty and anxiety brought by job losses and reduced income often lead to fear and others succumb to the pressure of having to find another job.

According to a study by Muraven M, Baumeister RF on self-control, stress, and anxiety show a positive correlation to gambling behavior. Muraven argues that the fight to stay in control of the situation (sudden strain on income) results in a quicksand situation. The more you try to deal with the situation, the more it consumes you.

The explanation behind this is that adapting to such negativities takes a lot of self-control strength, leading to reduced self-control performance. As a result, emotional difficulties contribute to problem gambling, and the situation worsens as emotional stability degrades.

Apart from increased emotional difficulties, unemployment opens up huge chunks of time, often spent at home. Unlike when working when there’s no time to spare, many unemployed people will end up bored, and as the saying goes, an empty mind is the devil’s workshop.

The only way to keep your mind busy is by gambling and this may lead to the development and sustained problem gambling. According to studies conducted by Mercer KB and Eastwood JB, boredom is a leading cause of gambling.

It’s not all gloom though. In a report by Mikesell on State Lottery Sales and Economic Activity, Mikesell states that recession has a positive effect on gambling. How so?

According to the report, a recession leads to reduced spending power on the population. Therefore, even if a gambler decides to place a bet, they’ll do it on a small scale. This is where lotteries come into the picture.

Lotteries offer gamblers a chance to hit jackpots that run into the millions of dollars with a small investment. With such an opportunity staring down at the gambler, it’s almost impossible to resist the urge to take a chance at turning their financial situation around. With this report, it’s easy to see why lotteries are the only type of gambling that seems to be recession-proof.

Increased gambling opportunities is also a positive impact associated with recession. Many gamblers, especially those in states where gambling is illegal, prefer offshore betting. Nevertheless, after the PASPA act was repealed by the Supreme Court in 2018, many states started legalizing gambling while others are still in the debate stage.

As tax revenues drop during a financial downturn, gambling may provide a solution if legalized. According to studies conducted by Richard B and Calcagno et al, economic developments pushed up to 13 countries to legalize casino gambling.

In both studies, it’s expected that the legalization of gambling will continue in the years to come due to high unemployment rates.

In Conclusion

While it may seem straightforward how recession impacts gambling activities, the correlation is still fuzzy. Some studies show increased activity during a recession while others show reduced activity during financial downturns.

However, one thing is for sure, and that is the increased gambling activity in the United States. From 2009 when revenues dropped to $102.215 billion, the personal consumption expenditure has been on a steady rise to hit $142.553 billion and this is expected to rise in the coming years as more states in the United States legalize gambling to avoid lost revenue in taxes to offshore betting.

Copyright 2020 © S N Chatterjee - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules