Reply to thread

Message: [QUOTE="Millhouse, post: 935521, member: 78"] The last link is a very good roundup of the research. [url]http://econlog.econlib.org/archives/2013/07/on_bastiat_and.html[/url] [url]http://college.holycross.edu/RePEc/spe/CoatesHumphreys_LitReview.pdf[/url] 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. [url]http://college.holycross.edu/RePEc/hcx/Matheson-Baade_FinancingSports.pdf[/url] Unfortunately, the methodology used to formulate estimates of economic impact is fatally flawed, resulting in a consistent bias toward large, but unrealized, impacts. Economic impact predictions are done in a reasonably straight-forward fashion. In the case of either an event or a franchise, the total number of visitors to the event or the team is estimated along with an average level of spending for each sports fan. The number of fans multiplied by the average spending results in an estimate of direct economic impact. Once the direct economic impact is determined, a multiplier is applied, which accounts for money re-circulating in the local economy. For most sports-related spending a multiplier around two is used, roughly doubling the direct economic impact. Although this methodology is easy to understand, typically researchers point to three primary flaws in most economic impact studies. The first common error is the failure to account for the substitution effect. While it is undeniable that sports fans around the country and around the world spend significant sums on spectator sports, in the absence of such entertainment opportunities, their spending would be directed elsewhere in the economy. A night at the ballpark means more money in the players‟ and team owner‟s pockets, but it also means less money in the pockets of local theater or restaurant owners. Most economists not associated with teams or event organizers advocate that any spending by local residents on local sporting events be eliminated from economic impact analyses. The next common criticism is crowding out. The crowds and congestion associated with major sporting events tend to reduce other economic activity in the local area, as sports fans displace other individuals. As with the substitution effect, sports tend to affect the allocation of economic activity across businesses and different sectors of the economy but not the total amount of activity that occurs Researchers who have gone back and looked at economic data for localities that have hosted mega-events, attracted new franchises, or built new sports facilities have almost invariably found little or no economic benefits from spectator sports. Typically, ex post studies of the economic impact of sports have focused on employment (Baade and Matheson, 2002; Feddersen and Maennig, 2009), personal income (Baade and Matheson, 2006a), personal income per capita (Coates and Humphreys, 1999; 2002), taxable sales (Porter, 1999; Coates and Depken, 2009; Baumann, Baade, and Matheson, 2008), or tourist arrivals (Lavoie and Rodriguez, 2005; Baumann, Matheson, and Muroi, 2009). These studies and a multitude of others generally find that the actual economic impact of sports teams or events is a fraction of that claimed by the boosters, and in some cases actually show a reduction in economic activity due to sports. See Table 7 for a list of published ex post economic impact estimates for a variety of large sporting events. [/QUOTE]

Verification: What is a Syracuse fan's favorite color?