In today’s Academic Minute, Dr. Kurt Rotthoff of Seton Hall University tests claims about the economic benefit of investing in large sports arenas and stadiums.
Kurt Rotthoff is an assistant professor of economics and finance at Seton Hall University where he teaches classes in economics and sports finance. His work has been published in numerous academic journals and he holds a Ph.D. from Clemson University.
Dr. Kurt Rotthoff – Economic Impact of Sports Arenas
Politicians often look for ways to increase the incomes and employment of their constituents. One of the ways they have tried this is by building sports stadiums using public funds. Politicians claim that bringing the team into town will create a local economic impact, that it will create jobs and income within the community. How? Well, creating jobs with the team causes those peoples’ incomes to increase and they will spend that money. As they spend that money, other people’s incomes will increase, allowing them to spend more money and this continues throughout the economy. This multiplier effect is why politicians claim there will be a positive economic impact from this stadium project.
Unfortunately, this simply does not happen. Public monies are used, but there is no evidence that these funds create an economic impact. Hundreds of millions of dollars are spent on new stadiums, with the claim that they will create tens- or hundreds of millions of dollars of local economic impact; however, looking at county employment and incomes after a team enters or leaves a town, a co-author and I find mixed results on employment, with no overall impact, and mainly no impact on incomes, but a few cases of a negative impact. This means there is no impact, or possibly a negative impact, of bringing a team to town, and no impact, with the possibility of a positive impact, when the team leaves town. This primarily occurs because there is a shift in consumption, from restaurants and bars to the stadium, when these teams come to town and thus no net increase in consumption. Restaurants and bars do open closer to the stadium, but this is a result of them closing locations in other sections of town.