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Stadiums as Economic Development Tools

Stadiums as Economic Development Tools. The Fact Behind the Fiction. Costs and Benefits. Benefits Enjoyment of the activities in the stadium Enjoyment of following the teams Prestige Secondary Benefits Increased wages or employment. Costs. Opportunity costs

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Stadiums as Economic Development Tools

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  1. Stadiums as Economic Development Tools The Fact Behind the Fiction

  2. Costs and Benefits • Benefits • Enjoyment of the activities in the stadium • Enjoyment of following the teams • Prestige • Secondary Benefits • Increased wages or employment

  3. Costs • Opportunity costs • What is given up by choosing this project? • Money spent could have been used on other projects whose returns are unknown. • Secondary Costs • Business attracted comes from somewhere • Lost incomes and employment from other areas • Externalities

  4. Some Common Mistakes in Economic Impact Studies Confusing Costs and Benefits

  5. Some Common Mistakes in Economic Impact Studies Valuing Local Spectators Like Out-of-town Visitors

  6. Some Common Mistakes in Economic Impact Studies Misuse of Multipliers

  7. Some Common Mistakes in Economic Impact Studies Omitting Opportunity Costs

  8. Some Common Mistakes in Economic Impact Studies Double Counting

  9. Some Common Mistakes in Economic Impact Studies Counting secondary benefits but ignoring secondary costs

  10. Some Common Mistakes in Economic Impact Studies Ignoring External Costs

  11. Economic Research • Carried out by researchers with no pecuniary interest in the outcome • Subject to “peer review” process - anonymous review by recognized outside experts

  12. Background • Examined 37 cities that had a professional football, basketball or baseball franchise over the period 1969-1997 • Accounted for rich set of sports-related events and factors • Used measures of economic well-being collected and distributed by U.S. Bureau of the Census

  13. Results • The professional sports “environment” lowered inflation adjusted income per person by a small but significant amount during period • Workers in a small sector - Amusements and Recreation - earned more • Offset by lower earnings and fewer jobs in related sectors - retail and services

  14. Explanations • Substitution in private spending • “WalMart” Effect • Substitution in public spending • World class city and enjoyment from following the team

  15. For more details... “The Stadium Gambit and Local Economic Development” by Dennis Coates and Brad R. Humphreys, Regulation, June 2000

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