Richard Florida
by Richard Florida
Thu Dec 27th 2007 at 11:25am UTC

The Stadium Ruse

A new report by sports economists Dennis Coates and Bruce Humphreys shows once again how pro sports stadiums don’t add to economic development – they actually have a net negative effect on local income (University of Illinois News via the Street).

“Our conclusion, and that of nearly all academic economists studying  this issue, is that professional sports generally have little, if any, positive effect on a city’s economy,” Humphreys and Coates wrote … The professors based their report on new data as well as previously published research in which they analyzed economic indicators from 37 major metropolitan areas with major-league baseball, football and basketball  teams. “The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over  the entire metropolitan area,” Humphreys and Coates noted in the report. The researchers found other patterns consistent with the presence of pro sports teams. Among them:  • a statistically significant negative impact on the retail and
services sectors of the local economy, including an average net loss, • an increase in wages in the hotels and other lodgings sector  (about $10 per worker year), but a reduction in wages in bars and restaurants (about $162 per worker per year).

Those employed in the amusements and recreation sector appeared, at
first glance, to benefit significantly from the presence of a pro team, with an average annual salary increase of $490 per worker, Humphreys said. However, he added, “this sector includes the professional athletes whose annual salaries certainly raise the average salary in this sector by an enormous amount. As it turns out, those workers most closely connected with the sports environment who were not professional athletes saw little improvement in their earnings as a result of the local professional sports environment.

The full report is here. I am amazed at how cities continue to get away with such boondoggles in the face of such overwhelming evidence that they are a waste of taxpayer money. Think for a moment of what other, more positive things could be done with those funds – the opportunity costs. I am also amazed that the economic development profession continues to fall behind stadium building efforts. Imagine if doctors continue to practice in a way that flies directly in the face of medical science. As a group of professionals, it would seem that economic developers should be held to some standard of professional accountability here.  Is that expecting too much?

5 Responses to “The Stadium Ruse”

  1. Vincent Clement Says:

    I never understood how cities in economically depressed areas have the nerve to subsidize a stadium or arena for a sport that brings it’s owners and players millions of dollars? I keep reading and hearing how billions upon billions have to be spent on upgrading infrastructure, yet money exists to fund a very profitable monopoly?

  2. Mike L. Says:

    “have the nerve to subsidize a stadium” – Here’s a reason – when I lived in Chicago the policy seemed to be “bread and circuses”. To forestall civil unrest and lessen street crime, the authorities arranged for major entertainment activities every summer weekend.

  3. RF Says:

    Agreed. The interesting thing is how small, declining cities often have to fork over the most. Financially successful teams in bigger thriving cities can frequently foot the bill themselves. So the people in smaller hard pressed cities can royally screwed.

    Bread and circuses – and not just in Chicago. It’s nation wide. Just tune into America’s popular culture. Half of me now believes that many, many Americans – somewhere in the backs of our minds – understand that decline of empire has set in. They just want to tune it out through mindless entertainment and similarly mindless consumption.

  4. DC Says:

    The bulk of the evidence seems to indicate that public funding of stadiums are bad investments for the region as a whole, but that appears to imply a degree of regional cooperation that does not really exist yet in most places. Are not most stadiums, at least in smaller markets, funded by the core city in hopes of sucking some of the wealth back in from the suburbs? Has anyone done any research showing the economic impact of stadiums on the core cities, disagregated from the overall regional impact?

  5. Michael Wells Says:

    I wonder if we went beyond economics what the correlations would be with a professional sports team? Civic pride or identification? Any correspondence with Putnam’s civic engagement? Happiness indexes?

    I think the key is the team. Nobody says “I want a big empty monolith in my city”. They say “I’m a Celtics fan”. The stadium is a byproduct most people probably don’t care about one way or another, except to see it as a way to have a team.

    I don’t have an opinion on this, except if it doesn’t make economic sense does it make some other kind?