Stephen Slivinski

Do sports teams really drive economic growth?

Posted on May 08, 2012 | Author: Stephen Slivinski
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When economists take a look at the experience of numerous cities across the nation over the past 50 years, they discover that the presence of sports teams, stadiums, and arenas – particularly when subsidized by local governments – don't drive growth in employment or personal income. ArenaAs an extensive 2008 review of the peer-reviewed economic studies published over the past 20 years concludes: "No matter what cities or geographical areas are examined, no matter what estimators are used, no matter what model specifications are used, and no matter what variables are used, articles published in peer reviewed economic journals contain almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy."

One of the main reasons sports teams and the facilities in which they play are not drivers of economic growth is because they don't create new economic activity. Instead, they displace other forms of economic activity.

For example, imagine you were going to spend money on a night out. You could spend it on an expensive dinner or you could spend it on tickets to a sporting event. But because you have a limited amount of money to spend, you wouldn't spend it on both.

This substitution of one type of spending for another is exactly what you see happening when you analyze the experience of cities with sports teams. Consumers spending more of their discretionary income on sports-related goods is offset by those same consumers spending less on other things. Thus, no net new economic activity results.

Another point economists make is that most of the profit generated by sports teams go to the players, owners, and shareholders of the team. Those individuals tend not to live in the area in which the team plays. Instead, the money is "exported" to be spent or invested elsewhere. This reduces or eliminates the "ripple effect" that sports teams have on the local economy.

Learn more:

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

Brookings Institution: Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums

Heartland Institute: Stadiums, Professional Sports, and Economic Development: Assessing the Reality

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