PUBLIC FINANCE REVIEW Siegel, Anders / INDIAN CASINOS Gambling is a rapidly growing industry with competing private, public, and Native American tribal interests. To examine the effects of this competition, the authors outline a simple econometric model for assessing substitution between lottery games and other forms of gambling. They estimate the model to examine whether an expansion in Indian casino gaming in Arizona is associated with a decline in lottery revenues. The findings imply that there is indeed a substitution effect. THE IMPACT OF INDIAN CASINOS ON STATE LOTTERIES: A CASE STUDY OF ARIZONA DONALD SIEGEL Nottingham University Business School GARY ANDERS Arizona State University West Casino gambling is one of America’s fastest growing and most profitable industries, generating approximately $48 billion in gross revenues in 1996 and double-digit rates of profit (Christiansen 1998). This extraordinary growth raises several interesting policy issues. In particular, the interaction between Native Americans and state gov- ernments over gaming is extremely important to tribal economies. These issues have been addressed, to a large extent, outside of the economics literature. However, conventional economic models can be extremely useful in evaluating public policy options and in resolving conflicts that inevitably arise. One such conflict involves Indian casi- nos, which are not subject to state or federal taxes. These casinos may displace state tax revenues levied on other business establishments. 1 AUTHORS’ NOTE: We thank J. Ronnie Davis, Roger Dunstan, Christian Marfels, Gerry Mildner, Karl Titz, two anonymous reviewers, and seminar participants at the 1998 Western Eco- nomic Association meetings in Reno for valuable comments and suggestions. Brian Lee pro- vided capable research assistance. We also wish to thank the following Arizona State govern- ment officials for their help in securing gambling data: Jill Marszalek, Arizona Lottery; Cara Hutson and Arthur Perez, Arizona Department of Gaming; Wade Turner and Paul Ryneveld, Ari- zona Department of Racing; and Steve Gelley, Bingo Section, Arizona Department of Revenue. PUBLIC FINANCE REVIEW, Vol. 29 No. 2, March 2001 139-147 © 2001 Sage Publications 139