The Economics of Sports

The latest edition of the Federal Reserve Bank of Atlanta's Public Affairs Forum focused on the economics of sports, long a topic of interest on the site. Specifically, the regional Fed office event focused on whether sports teams and mega-events (think the Olympics) are good for local economies. According to at least one economist, Dr. Robert A. Baade, the answer is no. To find out why, readers can view the video interview with Dr. Baade below.

UPDATE: In response the comment of a time-strapped reader who helpfully noted that we didn't explain why the answer is 'no,' a summary provided by the Fed can be found at the link provided above as well as here:

'In recent decades, state and local governments have subsidized the construction of numerous state-of-the-art sports facilities, in part based on the belief that it would spur economic development. But according to Baade's research, that assumption is incorrect.

Proponents of subsidized stadiums often rely on economic impact estimates that ignore important realities, he explained. For instance, a large portion of sports revenues go toward players' salaries. But since many players aren't full-time residents of the city in which they play, their salaries are often repatriated elsewhere instead of circulating within the local economy.

Further, households have limited amounts of time and money. So if they spend more of these resources on professional sporting events, they are spending less elsewhere, such as at local bowling alleys, restaurants, or movie theaters. In this sense, professional sports could actually contribute to a decline in economic activity "because so little money, relatively speaking, is being retained within the city to be spent and re-spent again," Baade said.'

We have also covered this topic in the past (albeit relying upon the analysis of others as we did in this post). That post can be found here.

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