Australia's Gambling Industries - Productivity Commission

Box P.1
Calculating the problem gambling expenditure share
The Commission sought to examine the share of expenditure accounted for by problem
gamblers (α) in Australia by calculating:
α =
∑
N
∑
N
wEP/ wE
{1}
i= 1 i i i i=
1 i
i
where w i is the weight associated with the ith observation, E i is the expenditure
measure (typically losses) for the ith person on gambling and P i is an indicator variable
which is equal to 1 for problem gamblers and 0 otherwise.
Equation {1} above can be re-written in a way that provides further insight into patterns
of expenditure by problem gamblers. As noted by Volberg, Moore, Lamar,
Christiansen, Cummings and Banks (1998, p. 354), another way of defining α is as:
α =
PREV × PLF
PREV × PLF + ( 1−
PREV )
where PREV is the prevalence rate of problem gambling and PLF is the Proportional
Loss Factor (equal to the ratio of losses made by problem gamblers to those made by
non-problem gamblers). This expression reveals that a high value for α is obtained if
PREV or/and PLF is high. For example, if the prevalence rate of problem gamblers
among a group of people who gamble is 2 per cent, and problem gamblers spend 10
times more per year on average than non-problem gamblers, then this implies an
expenditure share by problem gamblers of just under 17 per cent. Since the most
clearly distinguishable feature of problem gambling is high expenditures on gambling,
equation {2} is suggestive immediately that problem gambling shares of expenditure
are likely to be appreciable.
{2}
Adjusting for the source of problem gambling
Data from people seeking help from counselling services (chapter 17) reveals that
some forms of gambling, particularly gaming machines and wagering, appear to
pose higher levels of risk for problem playing. Once it is recognised that a problem
gambler’s problems may stem from just one form of gambling, it raises the question
of whether all other forms they may play should be tarred with the same brush.
After all, consider someone who feels they have impaired control over their gaming
machine play and spends $100 a week. They also play bingo once a week with
friends, spending only $5 each time — rather less than the average. In one sense it
seems legitimate to include the expenditure on bingo as part of this problem
gambler’s expenditure on gambling. However, if it is in no way a source of their
problem it is not clear why this expenditure should be treated differently to any
other form of expenditure, such as money spent on a movie or a meal.
P.8 GAMBLING