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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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... 1 Throughout this book, stadium is used to refer to all major sporting venues, including, but not limited to, indoor and outdoor arenas, ballparks, and speedways. 2 Or the economic costs (Bradbury, 2022;Coates & Humphreys, 2008). 3 In the United States, these communities of color may include majority Black, Hispanic, Asian, or Indigenous peoples, and their exposure to environmental hazards are measured against those of majority White neighborhoods. ...
... 6 Market dynamics includes, among others, the so-called Chicken or Egg and the Minority Move-In Hypothesis, which focuses on whether a hazardous facility is purposely sited in a predominately minority and low-income community or that facility was in place before a neighborhood's modern-day demographic characteristics had been established (see also Mohai and Saha [2015] on "disparate siting" vs. "post-siting demographic change"). 7 These supposed benefits have-time after time-been empirically disproven by a choir of peer-reviewed economic studies Coates & Humphreys, 2008). 8 Increasingly, however, some sport organizations and stadium operators have begun championing environmental causes and supporting the delivery of events in more sustainable ways. ...
... While advocates of hosting major sporting events claim the events are beneficial to the local economy, most scholars studying their economic impact agree that such events are an inefficient use of taxpayer money due to their considerable opportunity cost (Coates & Humphreys, 2008). However, as hosting may be a significant source of utility for locals, it is insufficient to consider benefits solely as a question of their "hard" economic effects. ...
This paper uses the contingent valuation method to estimate the willingness to pay for hosting the Tour de France start 2022 in Denmark. Using a dichotomous choice format with a one-off tax payment, we estimate a total economic value between €12.8–26.0 million for the 2.788 million Danish households, with €14.7 as our preferred estimate. Spike models reveal that the likelihood of voting in favor of an earmarked tax to retain the Tour de France in Denmark decreases with the physical distance from the route. Moreover, we find a negative effect of living in one of the host municipalities (start or finish of a stage), ceteris paribus. This indicates that if non-use values are higher for residents living in a host municipality, they are offset by the negative externalities associated with hosting.
... Researchers (e.g., Baade, 1996;Baade & Dye, 1988;Coates & Humphreys, 1999;Coates & Humphreys, 2008;Crompton, 2004;Matheson, 2019;Noll & Zimbalist, 1997;Rosentraub, 1999; have repeatedly shown that investing public dollars into professional sports stadium development projects does not always result in significant positive economic impact above and beyond project costs. Even so, the trend of extracting public financial resources to subsidize their construction has continued (Holloway & Humphreys, 2019). ...
The development of professional sports stadiums in the United States typically relies on public funding in the form of municipal bonds. Prior research has identified several economic and noneconomic reasons local governments choose to direct public funds towards the construction of stadiums. The overall conclusion of this research suggests sport stadiums do not result in significant increases in economic activity and therefore subsidized stadium development projects lack economic justification. In this study, the process of issuing bonds is examined. The authors describe the bond issuance process and utilize data associated with the bonds for the development of Allegiant Stadium in Las Vegas, Nevada to quantify the hidden costs associated with financing the venue. Findings demonstrate the financial consequences for taxpayers resulting from a lack of transparency in the municipal bond issuance process.
... However, larger events in large-sized cities (i.e., in the U.S. or other countries) may not prove as beneficial (cf. Coates & Humphreys, 2008;Harger et al., 2016;Humphreys & Prokopowicz, 2007) or possess similar results as the current research. Future research should investigate ways to continue to collect economic data in real-time. ...
The current study was designed to bridge a sporting event typological and geographical gap by investigating evidence of the economic impact of five small-scale sports events in the Western region of the United States. Utilizing the input-output economic impact equation established by the Sports Event and Tourism Association, data was collected from participants and spectators through on-site intercept surveys. Data was analyzed using the traditional calculations for economic impact as well as offering real-time economic impact data using an sporting event intercept survey procedure. Results showed small-scale events impact the economy of their host city positively, mainly by filling hotel rooms that would otherwise have gone vacant. Results also show that real-time economic impact data may prove more reliable to future decisions of cities hosting events. Previous research on mid-sized cities hosting sporting events as well as the current research related to small-scale sporting events proves more beneficial than large-scale sporting events in large-sized cities.
Given the information from the current study, local sports commissions and political figures may effectively advocate hosting small-scale events to their public using the justification of economic impact (traditional or real-time). Additionally, stakeholders of such events should consider maintaining or expanding the current inventory of small-scale events throughout the calendar year.
... Stadium boosters often hire consultants to conduct economic or fiscal impact analyses that demonstrate the proposed sports development will generate large returns to the community through increased economic activity, creating jobs and wealth in the community while growing the tax base to pay for itself through increased tax collections. These reports are part of what Coates and Humphreys (2008) describe as a "promotional literature." These reports are often released at the same time the stadium project is announced, because economic development justifications are persuasive in fostering favorable public perceptions of sports facility subsidies (Connolly & Touchton, 2020). ...
Local governments routinely subsidize sports stadiums and arenas using the justification that hosting professional franchises produces economic development and social benefits in the community. The prevalence of venue subsidies generated an extensive and vibrant research literature, which spans over 30 years and includes more than 130 studies. We chronicle this body of research from early studies of tangible economic impacts in metropolitan areas, using basic empirical methods, through recent analyses that focus on sublocal and nonpecuniary effects and employ more sophisticated empirical methods. Though findings have become more nuanced, recent analyses continue to confirm the decades‐old consensus of very limited economic impacts of professional sports teams and stadiums. Even with added nonpecuniary social benefits from quality‐of‐life externalities and civic pride, welfare improvements from hosting teams tend to fall well short of covering public outlays. Thus, the large subsidies commonly devoted to constructing professional sports venues are not justified as worthwhile public investments. We also investigate the paradox of local governments continuing to subsidize sports facilities despite overwhelming evidence of their economic impotence. Our analysis informs academic researchers and policymakers to motivate future studies and promote sound policy decisions guided by relevant research findings.
My inspiration for conducting this research stems from recent discussions Mayor David Holt and the Oklahoma City Thunder have presented to the public on the idea of constructing a new arena for the NBA franchise. As many recent sports venues have been built utilizing taxpayer money, I was interested in analyzing this situation through the possibility of a new arena for the Thunder being built with public funding. The research I conducted was focused on analyzing whether a new arena would provide a net positive or net negative economic impact on the Oklahoma City economy, along with analyzing the opportunity costs associated with subsidizing a new stadium. As part of the research project, I initially took the side of arguing against the use of subsidies for a new venue in Oklahoma City. Included within my paper are discussions of the historical context, common arguments of those supporting publicly funded stadiums, arguments against the use of subsidizing sports venues, insight into economist's opinions, the discussion of opportunity costs as it relates to Oklahoma and Oklahoma City, and the opportunity costs relevancy to economic growth. The results of my research conclude that the economic costs associated with subsidizing a new stadium for the Oklahoma City Thunder, utilizing tax-payer money, out-weighs the economic benefits to the area and its inhabitants.
We use daily mobile foot traffic data covering major league sports facilities and the surrounding commercial establishments in the US to pin down the size and the spatial distribution of foot traffic spillovers from sports facilities to local businesses. By employing the fixed effects and the IV estimation strategies, we show that the spillover benefits are heterogeneous across sports and business sectors. We find that 100 baseball stadium visits generate roughly 29 visits to nearby food & accommodation businesses and about 6 visits to local retail establishments. While the estimates for football stadiums are comparable, basketball & hockey arenas do not appear to generate significant spillovers for the surrounding businesses.
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.
Literature challenges the economic wisdom of major league sports stadia, especially when subsidized, but they continue to be constructed. If officials decide that a new stadium will be built, does it matter where it goes? This article theorizes that when major league stadia locate in the central business district (CBD), the metropolitan statistical area’s share of regional wealth increases and that share rises as more major league teams play there. The reason is that people attending games in the CBD are more likely to spend money before and after games in the CBD than if they attend games at non-CBD locations. By contrast, non-CBD stadia may create opportunity costs. The moat of parking that surrounds many such stadia may discourage development from locating nearby. Investments that could have generated more economic activity are diverted, sometimes outside the metropolitan area. Empirical evaluation supports theoretical expectations.
It is common for a city to use expensive incentives such as a state-of-the-art stadium or tax exemptions to induce a major professional sport team to relocate to or remain in its area. A city does so because it expects a professional sport team to enhance the local economy. In this article, the authors use an event study approach to evaluate the advisability of this strategy. Their results suggest that major league sports franchises from the four major U.S. team sports (baseball, football, basketball, and hockey) have an adverse impact on local per capita income for U.S. markets in both the short and long run.
This article presents another attempt at finding the favorable economic effects claimed by sports team owners and boosters. The article has four peculiarities. First, no attempt is made to build a model explaining the targeted dependent variable; rather, a modified Box-Jenkins procedure is used. Second, the targeted variable, the hotel occupancy rates, is specific to the tourism industry. Third, our estimations are based on monthly data over a period of 10 years. Last, the study deals with Canadian rather than American cities. Overall results are somewhat ambiguous, but there does seem to be some evidence that the hockey lock-out of 1994-1995 did have a negative impact on hotel occupancy rates.
This article uses data from the 1996 Summer Olympic Games and the 2002 Olympic Winter Games to test the predictions of regional input-output models. Real changes associated with these events are insignificant. Nominal measures of demand overstate demand increases and factor price increases absorb the impact of real increases in demand. Nominal changes appear to be limited to hotel prices. Input-output models of a regional economy are often used to predict the impact of short-duration sporting events. Because 1-0 models assume constant factor prices and technical coefficients between sectors are calibrated from long-run steadystate relations in the regional economy, the predictions greatly overstate the true impact. Because the predictions of these models are increasingly used, to justify public subsidies, understanding these deficiencies is crucial.
Many sports events, facilities, and franchises are subsidized either directly or indirectly by investments from public sector funds. The scarcity of tax dollars has led to growing public scrutiny of their allocation; in this environment there is likely to be an increased use of economic impact analysis to support public subsidy of these events. Many of these analyses report inaccurate results. In this paper, 11 major contributors to the inaccuracy are presented and discussed. They include the following: using sales instead of household income multipliers; misrepresenting employment multipliers; using incremental instead of normal multiplier coefficients; failing to accurately define the impacted-area; including local spectators; failing to exclude “time-switchers” and “casuals;” using “fudged” multiplier coefficients; claiming total instead of marginal economic benefits; confusing turnover and multiplier; omitting opportunity costs; and measuring only benefits while omitting costs.
Using the seven weeks of canceled baseball games caused by the 1994 strike as a natural experiment, the author analyzes the degree to which the absence of baseball affected retail trade and hotel room sales in the 24 U.S. cities hosting baseball franchises and in 4 control cites. The most important finding is that the strike had little, if any, economic impact on host cities. Retail trade appeared to be almost completely unaffected by the strike, and the declines in hotel room sales in 10 baseball cities were not consistent with decreases expected by changes associated with the strike.
Economic impact studies have been an important component of the debate surrounding the merits of subsidizing professional sports teams. However, various studies have arrived at remarkably different conclusions about the size of a sports team’s economic impact on the region in which they are located. The purpose of this study is to determine the causes of the wide variance of economic impact estimates between different studies. A meta-analysis was used on the 13 studies to determine the causes of the differing impacts. Although some of the variance is due to understandable differences in the size of the geographical region and sports team in question, differing assumptions about whether the expenditure of locals should be included accounted for a substantial variance in the impact.