Is Gambling Contagious? An Analysis of Electronic Gambling Machine Clustering in Germany

There are sizeable differences in the Electronic Gambling Machine (EGM) supply among German regions. Furthermore, the EGM supply concentrates in certain regions which results in gambling hot spots. Interestingly the spatial clustering of EGM supply is still observed when we control for agglomeration effects caused by population. This leads to the question why the EGM supply concentrates in some regions and remains low in others. We argue that the concentration of supply can be mostly explained by the socioeconomic characteristics of these regions. This paper makes three central contributions to the location based gambling research. First, it visualizes the absolute and relative supply of EGMs in German communities and highlights the spatial clustering of high and low EGM density regions. Second, it implements socioeconomic and geographical control variables for a more distinct description of regional differences. Third, it employs spatial econometric modelling to quantify and explain the occurrence of EGM hot spots. For our analysis we use census and EGM market data. The main finding implies, that there is a clear clustering of the EGM supply across regions at first, but when considering the socioeconomic characteristics / deprivation of the regions, most of the clustering effect is erased. The model explains most of the clustering effect which appears to exist only when there is no slender consideration of the socioeconomic differences across regions. This result supports the hypothesis that high gambling activity in one region does not affect the gambling activity in neighboring regions.