Institutions and Casinos on American Indian Reservations: An Empirical Analysis of the Location of Indian Casinos

Abstract

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.

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“…We code a reservation as zero if state courts cannot hear civil disputes on the reservation either because the reservation's state never asserted court jurisdiction over native lands, or because PL280 jurisdiction was exempted or retroceded as is outlined in the 1953 law or in the 1968 amendments to the law in the Indian Civil Rights Act. Our categorization of the law is consistent with other studies that have used variation in PL280 civil jurisdiction to study economic outcomes (Anderson and Parker, 2008;Cookson, 2010;Parker, 2012;Cookson, 2014). 8…”

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