Gambling, what good is that? Understanding Gambling Through the Lens Of Income Elasticity

Abstract

This study analyses the income elasticity of demand for gambling to classify what kind of good gambling is. A wide range of literature already exists that attempts to estimate income elasticity of demand for various types of gambling. Recently, however, previous studies have been criticised for methodological issues. This study contributes to the existing research by employing a novel method/design and providing updated insights on Swedish consumer behaviour, as no recent research has been done on the topic in Sweden. Using quarterly time series data between 2010 and 2024, we conduct an IV regression, identify gambling as an inferior good, and calculate a negative income elasticity of demand. The negative relationship aligns with previous theories discussing financial hardship and gambling. Therefore, it is plausible that periods of economic downturns and recessions, marked by increased economic uncertainty and typically a drop in disposable income, create a favourable market for gambling industries.