Gambling on Casinos for Economic Development: A Cost Benefit Analysis of First Nations Casinos

There are many challenges to developing viable economic development strategies on-reserve in Canada. Questions of location, size, resources, investment and access to markets are all important with these factors varying significantly across communities.  Many First Nations communities have shown great interest in pursuing Casinos as a focal point in their community plans. Currently there are 17 First Nations Casinos operating across Canada with a strong demand to expand into new territories.

The Supreme Court of Canada in R v. Pamajewon (1996) determined that Shawanaga and Eagle Lake First Nation did not possess the aboriginal right (as protected by the Constitution Section 35) to control and regulate on-reserve gaming (Belanger, 2011, 11). Because of this, First Nations have been forced to negotiate with provincial governments to license and operate gaming facilities in their communities, with varying degrees of success. Several provinces and First Nations in Canada are currently debating the efficacy of First Nations casinos from two distinct but potentially compatible perspectives: a) in general terms, the province’s own policy objectives; and b) more specifically, as an aboriginal development strategy. Despite this interest, there has been neither a framework for assessing, nor an attempt to measure, the social benefits and costs of aboriginal gaming in Canada.  This research project is designed to address this shortcoming.

An important element of cost-benefit analysis is from whose perspective the analysis is undertaken. Benefits accrue to different individuals and groups while the costs are not necessarily borne by the same. A “multiple accounts” analysis considers the net benefits to different groups and, when properly conducted, can sum the accounts to derive a complete social welfare perspective.   Using econometric tools developed by Evans and Topoleski (2002) in the context of evaluating American Indian Casinos, this paper examines the costs and benefits of First Nations casinos from three perspectives: (a) provincial governments; (b) First Nation communities; and (c) residents of the province generally. Costs will include cannibalization of other revenue, problem gambling, increased crime and erosion of traditional indigenous values.

If First Nations Casinos are to be considered a viable economic development strategy to address entrenched inequality between indigenous and non indigenous communities it is essential to appreciate all potential impacts both in the community and in surrounding areas. An important part of this analysis is to recognize and attempt to measure the social impacts of casinos. Even in the best-case scenario there are potentially damaging impacts with respect to problem gaming, cannibalization of the economy and erosion of traditional indigenous values.

References:

Belanger, Yale .2011. First Nations Gaming in Canada. Manitoba: University of Manitoba Press.

Evans, William N. and Julie H. Topoleski. 2002. “The Social and Economic Impact of Native American Casinos,” NBER Working Paper Series, Working 9198.