THE IMPACT OF A PROFESSIONAL SPORTS FRANCHISE ON

THE IMPACT OF A PROFESSIONAL SPORTS FRANCHISE ON COUNTY EMPLOYMENT 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-nationstop-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 Ø 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: yjit = bjxit + gjzit + mjit Assuming: mjit = ejit + vji + ujt …where t is the year, i is the county, and j indexes the three dependent variables (employment, payroll, and avg. wage per employee)

RESULTS: EMPLOYMENT

RESULTS: PAYROLL

RESULTS: AVERAGE WAGE

OVERALL EFFECT: Employment Payroll Average Wage per 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. Ø 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-subsidysucking-sports-stadiums>.