Short and long run income elasticity of gambling tax bases: evidence from Italy

di Bella, Enrico and Gandullia, Luca and Leporatti, Lucia (2014): Short and long run income elasticity of gambling tax bases: evidence from Italy.

Abstract

In periods of economic recession and budget constraints, it becomes essential for the governments to understand which tax revenues are more likely to guarantee a stable or increasing amount of revenues able to support the provision of main public services without depending too much on variation in Gross Domestic Product (GDP). The aim of this paper is to analyze a particular source of tax revenues in Italy, namely gambling tax revenue split by game type (i.e. Lotto; Lotteries; Entertainment machines), in order to understand how tax bases react to changes in income, providing a measure of short run (variability over the business cycle) and long run (growth) income elasticity of different gambling tax revenues. Results show that gambling activities tend to be impressively reactive to variation in income in the long run, and, on the contrary, not particularly volatile in the short run.

• Item Type: MPRA Paper
• Language: English
• Keywords: dynamic ordinary least squares, error correction models, excise taxation, gambling tax revenue, income elasticity of tax base.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C10 - General; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H27 - Other Sources of Revenue; H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General

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