Although I am a sports fan, this may constitute a conflict of interest. Because that means I have a conflicted opinion about public subsidies paid to sports stadiums. The economic evidence on this point is very clear. Such subsidies can shift people's spending on entertainment from one part of the city to another, but the net benefit to urban areas is likely negative. John Charles Bradbury, Dennis Coates, and Brad R. Humphreys consider the evidence in „.The impact of professional sports franchises and venues on local economies: A comprehensive study. (economic research journal, September 2023, 1389-1431). The authors write:
From 1970 to 2020, state and local governments committed $33 billion in public funds to construct major league sports venues in the United States and Canada, with median public funds covering 73% of venue construction costs. did. The proliferation of subsidized sports stadiums and arenas has spawned a vibrant economics literature evaluating their effectiveness in stimulating economic activity. This literature contains almost universally agreed evidence that sports venues do not have a significant positive impact on local economies. …However, this literature has expanded significantly since the last comprehensive literature review. We examine the extensive academic literature on the economic impact of sports teams and venues on local communities. The literature includes more than 130 papers, spanning more than 30 years, with most published in the past 10 years. We document that a clear consensus exists in the results reported in this literature.
Many of us sports fans know that when we watch a game, nearby restaurants, bars, and parking lots often do good business. Of course, the same goes for the economic activity of the venue itself. How do we reconcile this first-hand evidence with economic research? Bradbury, Coates, and Humphreys write:
Robust empirical results demonstrating the ineffectiveness of professional sports in local economies likely reflect simple theoretical explanations. In other words, consumer spending on sports represents a transfer from other regional consumer spending rather than net new spending. Although sports games attract non-locals to spend money in the area, these visitors also crowd out other tourists who are drawn to other consumption facilities common to major U.S. cities. Masu.Even if you have external visitors
Most of the consumer spending in and around professional sports venues is done by local residents, as they are attracted to sporting events. Therefore, the opportunity cost of local sports consumption falls primarily on other competing local businesses, such as movie theaters, restaurants, and retail stores. Most spending on game tickets, concessions, and related hospitality near sports venues would have occurred elsewhere in the host jurisdiction without the presence of professional sports teams. Sports-related spending primarily reflects the reallocation of existing spending by residents rather than increases in local spending.Additional spending from match-goers tends to be concentrated in specific sectors of the local economy and in areas that cannot bear the full tax burden of subsidies. Furthermore, the influx of consumers can also create local nuisance and congestion externalities such as traffic, crowds, noise, trash, and crime, which can reduce the positive economic effects. Furthermore, there is no obvious reason to expect income or employment multipliers.
Sports spending will be larger than other types of local consumption spending, which is crowded. Consistent empirical findings regarding non-substantive tangible economic impacts from professional sports teams and venues are therefore consistent with theoretical expectations.
If the economic evidence is against you, you (in this case me) argue for non-economic benefits. Economists sometimes refer to them as „unused benefits.“ Even though I haven't been to a match in a few months (a combination of limited time and high ticket prices means I don't get to see many matches in person), I still miss reading and hearing about matches. enjoying. Local newspapers probably devote more space to sports coverage than international news. During my commute, I often listen to local sports talk radio stations. I sometimes watch matches on TV. Talking about the weather or sports is often an easy and non-controversial conversation starter.
Some economists have attempted to estimate this type of „disuse benefit“ using sophisticated survey data. A common finding is that the social benefit is about 15% of the cost of building a facility, which is not enough to justify the level of public subsidy.
Another debate concerns whether a new stadium will increase property values in the area surrounding the stadium. The evidence here is not clear-cut, but the broad summary is that in suburban areas, new stadiums often lower local property values (households and businesses don't necessarily want to be near a stadium). Urban areas can increase local real estate values. When interpreting such results, it's important to remember that large events tend to result in increased traffic congestion, noise, and even crime. So, unless you're a fan, the benefits don't really balance out the drawbacks.
Of course, all this creates a contradiction. If public subsidies for stadiums don't pay off, why do they continue to occur? There are two possible answers here. One is that stadium subsidies stem from a sinister mix of vocally expressed special interests, empire-building local officials, and the threat that teams might be relocated. The result is a kind of arms race in which cities find it profitable to limit these subsidies altogether, but few individual cities attempt to do so on their own. This is similar to building certain facilities or having certain types of offices just because all other universities are doing it. This is similar to efforts to provide unreasonably high tax breaks and subsidies to large companies that promise to relocate to specific areas.
Another possible answer is that economic research does not capture something important about the role of sports teams in the portfolio of entertainment activities in metropolitan areas. For example, a particular employer and its employees may want to live in a city where things happen. After all, stadiums are often used for non-sporting events, such as concerts, trade shows, monster trucks, and anyone on the ice. If your metropolitan area didn't have a football stadium, Taylor Swift would never have visited.
From this perspective, the insight that subsidies for sports stadiums are often too high does not necessarily mean that no subsidies at all are justified. Perhaps part of the answer is for at least some urban areas to negotiate tougher subsidy cuts, thereby setting a precedent for subsidy cuts that other urban areas can follow. .