THE IMPACT OF A PROFESSIONALSPORTS FRANCHISE ON COUNTYEMPLOYMENT AND WAGES

John Jasina

and

Kurt W. Rotthoff

Presented By: Kelly Dallavalle

ABOUT THE AUTHORS

John Jasina Assistant professor in the School of Business at

Claflin University Research includes economic impact of professional

sports, organization of sports leagues, and applied microeconomics.

Kurt W. Rotthoff Assistant professor in the Department of Finance at

Seton Hall. Research interests include sport finance, financial

economics, and market efficiency

INTRODUCTION

Public funds are often used to subsidize privately owned professional sport franchises

Politicians claim these teams develop the economy in their cities. Create new jobs Increase average incomes

Past research has shown little or no impact on employment or income

INTRODUCTION

Estimated public subsidies Prudential Center - $200 Million Barclays Center - $500 Million

Demause, Neil. "The Nation: Stop The Subsidy-Sucking Sports Stadiums." npr, 15 Aug 2011. Web. 4 Mar. 2014. <http://www.npr.org/2011/08/05/139018592/the-nation-stop-the-subsidy-sucking-sports-stadiums>.

PREVIOUS STUDIES

Baade and Dye (1988, 1990) looked at retail sales and aggregate income in Metropolitan Statistical Areas (MSAs). 1988 paper -- little support for a link between major

league sports and manufacturing activity 1990 paper -- stadiums had an insignificant impact on

MSA incomes

Baade (1996) examined a professional sports team's ability to create jobs – NO positive correlation.

Baade and Sanderson (1997) studied 10 MSAs Nine had a significant impact Five of those were positive, and four were negative.

PREVIOUS STUDIES

Coates and Humphreys (2003)

Small positive effect on earnings and employment in the amusement and recreation sector However this sector includes the professional athletes

Decrease in earnings and employment in other sectors.

Franchises cause a shift in consumption from one sector to another.

WHY CONTINUE INVESTIGATING?

Sports-related spending is a small portion of overall spending in an MSA. May be difficult to isolate franchise’s impact over such a

large area Could cause the mixed results of previous studies

Using county level data should provide more precise measurement of a franchise’s impact

STUDY FORMULATION County Business Dataset produced by the US Census

Bureau Standard Industrial Classification system for employment

data

58 counties who had a professional sports team between 1986 and 2005 (NHL, NBA, NFL or MLB) Then, variables were set up for the County and for the

Franchise:

MODEL:

…where t is the year, i is the county, and j indexes the three dependent variables (employment, payroll, and avg. wage per employee)

yjit = bjxit + gjzit + mjit

Assuming:

mjit = ejit + vji + ujt

RESULTS: EMPLOYMENT

RESULTS: PAYROLL

RESULTS: AVERAGE WAGE

OVERALL EFFECT:

Average Wage per Employment Payroll Employee

REGRESSIONS

REGRESSIONS

REGRESSIONS

KEY FINDINGS

Supports theory that jobs are not created – just moved between industries

Employment in the liquor sector decreases and in the food sector increases

The presence of franchises has virtually no effect on payrolls, and when it does, the effect is negative

CONCLUSION

Claims that stadiums will induce job creation and revenue expansion are unsubstantiated.

Employment within clothing, drinking, food, hotel, and liquor industries have mixed results when a franchise is present Most of the payroll data is insignificant, but the

coefficients that are significant are all negative. Real per capita income falls when sports

franchises are present

Continued research over longer periods of time could be more telling.

AS UNIVERSITY OF CHICAGO ECONOMIST ALLEN SANDERSON

MEMORABLY PUT IT,

"IF YOU WANT TO INJECT MONEY INTO THE LOCAL ECONOMY, IT WOULD BE

BETTER TO DROP IT FROM A HELICOPTER THAN INVEST IT

IN A NEW BALLPARK."

Demause, Neil. "The Nation: Stop The Subsidy-Sucking Sports Stadiums." npr, 15 Aug 2011. Web. 4 Mar. 2014. <http://www.npr.org/2011/08/05/139018592/the-nation-stop-the-subsidy-sucking-sports-stadiums>.