Do New Lottery Games Stimulate Retail Activity? Evidence from West Virginia Counties

In this paper we examine the impact of the lottery sales and the introduction of new lottery games on the retail activity using panel data on lottery sales, the adoption of new lottery games in West Virginia and in neighboring states, and retail income (a proxy for retail sales) for all 55 counties in West Virginia over the 1987-2001 period. Importantly, we are able to utilize changes in neighboring state lottery status to examine the potentially endogenous relationship between lottery sales and retail activity. Our findings generally show that lottery sales are positively associated with retail income, but perhaps surprisingly this positive effect is generated from interior counties and not border counties. We also find that the introduction of video lottery in several West Virginia counties has resulted in a significant increase in retail income.