Transcript Measuring the Economic Impact of Sports Activities

Measuring the Economic Impact of
Sports Activities
Timothy S. Sullivan, Ph.D.
Department of Economics & Finance
Southern Illinois University Edwardsville
Last Update: August 22, 2005
Roadmap
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What is economic impact analysis?
Difficulties in economic impact analysis:
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Economic activity versus economic impact
Establishing the counterfactual
One-time versus ongoing impact
Direct, Indirect and Induced Impact
What are the alternative uses of public money?
Examples of Economic Impact
Application: A new Busch Stadium?
Economic Impact Analysis
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Economic impact analysis attempts to measure
how a change (the building of a stadium, the
hosting of a Superbowl) will impact the local
economy.
Variable of interest is usually local income
(GDP).
May also address tax revenue, jobs,
population, etc.
Conservative Estimation of Impact
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Why are economic impact estimates frequently
overstated?
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Measuring activity versus impact
Poorly considered counterfactual
One-time versus ongoing impact
Question: Activity vs. Impact
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Suppose, at a sporting event in St. Louis, an
out-of-town vendor sells a t-shirt, made outside
of St. Louis, for $25. Does this cause $25 of
economic impact?
Economic Activity vs. Impact
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Economic Activity is the value of new goods
and services exchanged in the area.
Economic Impact gives the new income (or
other variable) in the area.
Question: Establishing the
Counterfactual
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Suppose that Gateway International Raceway
is able to attract a Winston Cup Race. Should
we include the impact of all expenditures (on
locally produced products) at the track for the
entire weekend?
Establishing the Counterfactual
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It is important to carefully determine what the
region would look like without the event. This
“what if?” is called the counterfactual.
Must be careful not to include expenditures by
local people, if they would have spent the
money locally anyhow.
Must be careful not to include impact from
events that would have occurred anyhow.
Question: Establishing the
Counterfactual
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Part of the impact of SIUE on the region is that
students spend money on movies, food, rent,
etc. Which students should be included when
measuring this impact?
Question: One-time vs. Ongoing
Impact
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Suppose a new racetrack is being built. Is the
economic impact likely to be the same from
year to year?
One-time vs. Ongoing Impact
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Many of the largest expenditures are one-time
expenditures:
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Facility construction
Legal, financial and architectural services
Three Types of Impact
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Direct Impact: expenditures made to complete
project (payments to construction company).
Indirect Impact: expenditures made by
suppliers (construction company buys raw
materials and equipment).
Induced Impact: expenditures made by
workers with extra income (construction worker
buys a new car).
Alternative Uses of Public Money
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Virtually any use of local money will cause an
economic impact about twice the value of the
initial expenditure.
Economic impact is greatest when:
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Expenditures occur locally
Use of product improves productivity (university)
Attracts visitors to area (and keeps their money)
Examples of economic impact
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Winston Cup race at Gateway
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Lowe’s Motor Speedway (Concord, NC)
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Annual: $276M
Phoenix International Raceway
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One-time: $53M; 421 jobs
Annual: $46M; 762 jobs
Annual: $226M
Hosting a Superbowl
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One-time: $306M
Examples of economic impact
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Atlanta Motor Speedway (two Nextel Cup
races): $455M.
Gross, Doug, “Atlanta makes pitch for
NASCAR Hall of Fame,” AP, Yahoo!
Sports, August 17, 2005.
Examples of economic impact
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Motor speedway in the Puget Sound Region
(Seattle)
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$256M during construction
$87M to $181M annual1
Berk & Associates, “Economic Benefits Analysis of a Motor Speedway in the Puget Sound
Region,” May 19, 2004.
Application: A new Busch Stadium?
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Which expenditures would be one-time?
Which would be annually recurring?
What is the counterfactual? Which fans should
have their expenditures counted? Which
expenditures should be counted?
Would the Ballpark Village revitalize
downtown?
Other uses of the public money?