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Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?

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This paper reviews the empirical literature assessing the effects of subsidies for professional sports franchises and facilities. The evidence reveals a great deal of consistency among economists doing research in this area. That evidence is that sports subsidies cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates. The paper also relates survey evidence showing that economists in general oppose sports subsidies. In addition to reviewing the empirical literature, we describe the economic intuition that probably underlies the strong consensus among economists against sports subsidies.
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... Therefore, it is likely that most financial resources diverted to these events (Maennig, 2019) could have achieved a more considerable impact if used for other purposes (Késenne, 2005;Taks et al., 2011). Hence, using taxpayers' money to host large-scale events incurs significant opportunity costs for society (Alm et al., 2014;Coates & Humphreys, 2008). In line with this, the consensus among economists is that the overall impact of hosting such events is marginal at best and often negative (Baade & Matheson, 2004b;de Nooij & van den Berg, 2018). ...
... Nor does it have an impact on sector-specific employment in the given year or the following year. These findings support existing research that typically concludes that the effects of hosting sports events are non-existent or even harmful for the economy (Coates & Humphreys, 2008). ...
Chapter
The consensus among economists is that tangible effects associated with hosting major sporting events are close to non-existent. Costs associated with these events are usually covered by public funds, creating opportunity costs that outweigh the associated benefits. However, existing research has mainly focused on major international sporting events that require large-scale (public) investments to build the necessary facilities to host them. This paper focuses on the world's most prominent professional cycling event, the Tour de France, which does not require large-scale infrastructural investments. Deploying appropriate regression modeling to regional level data, we find that hosting the Tour de France does not seem to have a significant impact on the annual gross domestic product (GDP) or employment in related sectors. (JEL Z23, L83, H41)
... There are several rationales that city leaders and business leaders provide for the use of public funds to build new sports facilities and attract professional sport teams, such as economic and community development, improving quality of life of residents, and tourism (Baade and Matheson, 2004;Chalip, 2006;Misener and Schulenkorf, 2016). However, it is largely viewed as a contested practice as independent academic research largely debunked the purported economic benefits of hosting teams decades ago (Quirk, 1987;Crompton, 1995;Baade, 1996;Coates and Humphreys, 2008). Despite such concerns, cities continue to allocate public funds and build facilities, often as part of comprehensive downtown (re)development efforts, in an attempt to relocate economic activity back to the city core (Mason, 2016). ...
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Cities of all sizes are actively engaged in developing various urban infrastructure projects. A common strategy used in larger North American cities is employing arena-anchored urban development projects, where a professional sports team is used as an anchor tenant of a sports facility to generate development in the city. One means of relocating economic activity is to increase visitation to the desired redevelopment area. In this paper we used the visitor economy as a lens to explore how arena-anchored projects and the professional sports teams that play there fit into a local city's tourism economy. To conduct this study, a multi case study design was used to draw data from two cities: Columbus, Ohio, and Detroit, Michigan. Interviews were goal directed and conducted in person with leaders in Columbus (n = 9) and Detroit (n = 10), and inductive and deductive approaches to coding were undertaken in the form of content analysis. The results indicate that growing the visitor economy through arena anchored urban development relies on planned placemaking via the strategic approach of bundling diverse amenities together. These findings provide valuable feedback to those cities considering arena development projects, and how the arenas may be combined with other civic amenities to undergird the local visitor economy.
... The literature here is large and varied and a general consensus has emerged that ex-ante studies tend to overestimate impacts and that the typically small (or even negative) economic impacts do not justify the outlays connected to mega-events (e.g. Baade and Matheson, 2016;Coates and Humphreys, 2008;Porter and Fletcher, 2008;Zimbalist, 2015;see Scandizzo and Pierleoni, 2018 for a comprehensive survey). ...
Article
The Olympic Games and the Football World Cups are among the most expensive projects in the world. While available theoretical explanations suggest that the revenues of mega-events are overestimated and the costs underestimated, there is no comprehensive empirical study on whether costs exceed revenues. Based on a custom-built database from public sources, this article compares the revenues and costs of the Olympic Games and World Cups between 1964 and 2018 ( N = 43), together totalling close to USD 70 billion in revenues and more than USD 120 billion in costs. It finds that costs exceeded revenues in most cases: more than four out of five Olympics and World Cups ran a deficit. The average return-on-investment for an event was negative (– 38%), with mean costs of USD 2.8 billion exceeding mean revenues of USD 1.7 billion per event. The 1976 Summer Olympics in Montréal, the 2014 Winter Olympics in Sochi and the 2002 World Cup in Japan/South Korea recorded the highest absolute deficits. The Summer Olympics 1984 in Los Angeles, the Winter Olympics 2010 in Vancouver and the 2018 World Cup in Russia are among the few events that posted a surplus. The article concludes that the Olympic Games and the Football World Cup suffer from a structural deficit and could not exist without external subsidies. This finding urges a re-evaluation of these events as loss-making ventures that lack financial sustainability.
... Subsidy proponents frequently tout the generation of tangible economic benefits as a primary justification. Almost no empirical evidence supports these claims (Coates and Humphreys 2008;Humphreys 2019). However, subsidy proponents sometimes claim that building a new stadium or arena in a city will increase the attractiveness of the city by expanding the leisure amenities on offer. ...
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Migrants play a vital role in economic development, and city amenities play an important role in attracting migrants. This paper explores the role of one such amenity—major league sports stadiums—plays in intra-U.S. migration decisions. We use Internal Revenue Service tax-filing data and stadium construction data for major sports stadiums between 1991 and 2014 to create an unbalanced panel of migration flows between 439,386 Metropolitan Statistical Areas (MSAs) pairs. Analyzing migration patterns over various time windows following the construction of new sports facilities, we find little evidence that new sports facility construction or the aggregate expenditures on new sports stadiums draw migrants between U.S. MSAs. We find weak evidence that suggests stadium construction acts as a deterrent to migration. Our primary conclusion is that spending on stadiums is not only ineffective in attracting migrants, but the opportunity cost associated with stadium construction likely reduces the ability of MSAs to attract migrants through the provision of other amenities or public goods.
... More recently, Potts (2021) finds that athletes from nations with greater rule of law and more control of corruption are less likely to be disqualified and also earn more medals at the Summer Olympics from 1996-2016. For readers who are interested in a more detailed history and politics of the Olympics, we also suggest these books among many others unlisted here: The Olympics: A History of the Modern Games (Guttmann 2002), Beyond the Final Score: The Politics of Sport in Asia (Cha 2009), The Politics of the Olympics: A Survey (Bairner and Molnar 2010), and Understanding the Olympics (Horne and Whannel 2020). ...
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Collective ideologies are a feature of the Olympic Games as individual athletes represent entire nations. Prior research has explored one dimension of Olympic ideology, finding a link between national pride and hosting the Olympics. This paper extends the literature by considering a wider variety of ideological indicators, including willingness to fight for country, confidence in government, and beliefs about different political systems. The results using a series of global surveys across several decades suggest that success at the Olympics and hosting of the Olympics does not guarantee greater citizen support or government legitimacy. Performance in the Summer Olympics has no consistent effect on the ideological views of survey respondents. In terms of hosting the Summer Olympics, host nations experience an increase in willingness to fight but a decrease in government confidence. These effects vary based upon the level of democratic quality of the host nations.
... Stadium and arena subsidies are often defended as economic development projects, based on the expectation that associated commercial activity will spill over onto the surrounding community to stimulate economic growth. However, consensus findings reported in the large literature on the economic impacts of sports facilities and events offer little support for the hypothesis that sports-related commerce stimulates the local economy (Coates and Humphreys 2008). Spending on sports appears to emanate from intrajurisdictional transfers among residents who sacrifice other local consumption options rather than generating net new economic activity in the community. ...
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Local governments often justify subsidizing sports stadiums as economic development projects that have positive returns on investment. If this is true, economic and quality-of-life spillovers that are capitalized in local property values ought to generate additional tax revenue for host municipalities through increased property assessments. This analysis uses the synthetic control method to estimate the effect of a new publicly-funded professional baseball stadium and team relocation on property assessments in Cobb County, Georgia. Cobb assessment values did not increase relative to other metro-Atlanta counties following the stadiums’ announcement or opening, which is inconsistent with the stadium having a positive fiscal impact, even with its desirable location and accompanying mixed-used development. The findings are consistent with past economic studies and are likely generalizable to other stadium projects.
... However, an increasing amount of research on elite sport and events has raised questions about these benefits (De Rycke & De Bosscher, 2019). With regard to tangible effects, the evidence clearly points towards marginal, absent, or even negative effects of hosting major sport events (Coates & Humphreys, 2008;Zimbalist, 2017). ...
Article
It is a common expectation among politicians, civil servants and sport managers that hosting a major sporting event or achieving international elite sport success yields a variety of positive externalities grounded in the “Virtuous Circle of Elite Sport and Events” model. However, over the years various studies have shown that this model is not necessarily an accurate depiction of reality. This paper adds to existing research by testing whether elite sport success or hosting a major sport event can have any positive effects on citizens’ health. By employing multilevel regression models to nine rounds of the European Social Survey – consisting of individual-level data from 2002 to 2019, covering 37 countries, 219 country-survey-years, and almost 400,000 respondents – we test whether health-related impacts of elite sport success and hosting major sport events can be identified. The model output from our regressions does not indicate that sporting success or hosting major sport events contributes to better health. The results question the “Virtuous Circle of Elite Sport and Events” model and stipulate that politicians, practitioners, and sports managers should be aware of overestimating potential positive externalities from elite sport.
Chapter
Sportpolitik stellt ein institutionell komplexes und dynamisches Politikfeld dar. Ein adäquates Verständnis der aktuellen Sportentwicklung setzt die Integration politikwissenschaftlicher Erkenntnisse voraus, da sich der Sport durch die Wiedervereinigung im Jahr 1990 deutlich politisiert hat. Staatliche Akteure und demokratische Öffentlichkeit zeigen ein größeres Interesse an sportpolitischen Fragen. Sowohl auf internationaler, europäischer als auch nationaler Ebene ist zu beobachten, dass politische Akteure jetzt willens sind, sich nunmehr auch gegen Sportverbände durchzusetzen. Schließlich wird der Sport als Instrument für sehr unterschiedliche politische Ziele eingesetzt, obwohl seine Effektivität nicht immer klar ist. Die gegenwärtigen Debatten über die Legitimität der internationalen Sportverbände und des Leistungssports lassen weitere Veränderungen erwarten. Dieser Beitrag ist Teil der Sektion Geschichte des Sports, herausgegeben vom Teilherausgeber Michael Krüger, innerhalb des Handbuchs Sport und Sportwissenschaft, herausgegeben von Arne Güllich und Michael Krüger.
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Thesis
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