This paper empirically investigates the institutional determinants of whether a tribal government invests in a casino. I find that the presence of Indian casinos is strongly related to plausibly exogenous variation in reservations’ legal and political institutions. Tribal governments that can negotiate gaming compacts with multiple state governments, because tribal lands span state borders, had more than twice the estimated probability (.77 versus .32) of operating an Indian casino in 1999. Tribal governments of reservations where contracts are adjudicated in state courts, rather than tribal courts, have more than twice the estimated probability (.76 versus .34) of investing in an Indian casino, ceteris paribus. These findings suggest that states’ political pressures and predictable judiciaries affect incentives to invest in casinos. This study contributes, more generally, to the empirical literature on the effects of institutions by providing new evidence that low-cost contracting is important for taking advantage of substantial investment opportunities.
Saturday, June 11, 2011
A paper of mine is now officially published at The Journal of Law and Economics. Here is the abstract (link to the paper is gated).