The Productivity Overhang: The Effect of Online Sports Betting Legalization on Local Labor Market Outcomes

Abstract

After the Supreme Court took down the Professional and Amateur Sports Protection Act (PASPA) in 2018, the sports betting industry has rapidly launched and grown across states in both the retail and online space. Using labor market estimators from the Bureau of Labor Statistics, Bureau of Economic Analysis, and U.S. Census Bureau, this study aims to find the correlation between online sports betting legalization and labor productivity and participation. The study finds that amongst a 50-state panel dataset from 2015 to 2024, legalized sports betting generates a statistically significant 0.6 percentage point decrease in annual growth rate of real GDP per hour worked. The effect of legalized sports betting is not statistically significant toward productivity or participation rate on a 50-state panel, but the model does find a general downward correlation in productivity with a coefficient of 0.82 and a general upward trend in participation with a coefficient of 0.165. Furthermore, when the panel is restricted to states that legalized in 2018 and 2019, the productivity overhang is doubled to a statistically significant -$1.42 per hour worked. Regarding labor supply, while the national panel shows no significant shift, the earliest adopters, New Jersey and West Virginia, exhibit a 1.281 percentage point increase in participation rate. This suggests that sports gambling may be forcing people in the long run to work more as their financial stress from OSB is taking hold. Furthermore, these results suggest that the combination of mobile technology and sports betting has removed the boundary between leisure and labor, leading to a constant force of presenteeism, generating measurable negative externalities on the American workforce.