FISCAL PRESSURE, TAX COMPETITION, AND THE INTRODUCTION OF STATE LOTTERIES

This paper uses discrete-time hazard function estimation methods to examine the factors that affect the probability that a state will enact a lottery, where the probability is assumed to depend upon on economic, fiscal, demographic, and political factors. Of special interest is the hypothesis that a state enacts a lottery in response to fiscal pressures. The results suggest that fiscal stress played an important role in the early introduction of state lotteries, but this influence has declined in recent years. Rather, political considerations and at tempts to mimic the behavior of neighboring states now seem the dominant factors.