Birmingham hosted The World Games this summer on the heels of the revived United States Football League’s inaugural season. The World Games had a projected quarter billion dollar impact and brought thousands to Birmingham. Can sports drive prosperity for Birmingham and Alabama?
Failing to achieve “major league” status may help explain Birmingham’s relative decline. Birmingham had the 5th largest metro population in the South in 1950 but fell to 18th by 2020. The South had no major league teams in 1950, but the four cities larger than Birmingham – Dallas, Houston, New Orleans, and Atlanta – all landed at least one team over time.
Decades of economics research, however, warn that the impact of pro sports is small. A new paper by economists J.C. Bradbury, Dennis Coates and Brad Humphreys reviews more than 130 published papers. A clear consensus emerges: professional sports’ modest economic impact does not justify the subsidies cities provide for teams and stadiums.
A literature review does not undertake new research. But the authors of this new review have conducted many of the included studies. “Mass science” today involves research by thousands of Ph.D.s in every field. One study provides only a snapshot. Patterns emerging from dozens or hundreds of studies with different data sets, control variables, and statistical methods are far more robust.
Pro sports could boost an economy in two ways. The first is directly through the spending. This spending produces second and third rounds of spending: fans attend games, then team employees buy cars, letting car salespeople spend more, and so on. The rounds of spending – captured by multipliers in economic impact analysis – create the total effect.
A second channel is indirect. Economists label recreation, leisure activities and entertainment options amenities. Businesses can more easily recruit workers to cities with more amenities. Pro sports could help attract businesses drawing employees from around the country.
Several factors, however, limit sports’ impact. First, sports do not boost other industries like high-tech or biomedical research might. Second, much fan spending is diverted from other items. Imagine that an NFL team moves to Birmingham next season. Fans will buy tickets, but if their incomes are not higher, this must come from spending less on other things. Finally, while teams receive national TV money, not all pro athletes live where they play and generally save a lot during their playing careers.
Only data analysis determines if cities with pro teams are more prosperous or if cities adding teams grow faster. The first economic studies compared income, income growth and employment across metro areas, controlling for other factors affecting growth. Sports teams do not produce metro-level growth.
Research then sought to document more localized or targeted growth given the size of metro areas. Metro Atlanta is over 8,300 square miles and would rank 18th among states in population. Economists have documented localized growth but only within a mile or two of stadiums and mostly in businesses related to sports, like restaurants. The narrow impact radius confirms a lack of broad stimulus.
Strikes and postseasons provide additional evidence. If sports spur economic activity, the Atlanta Braves’ World Series title run should have triggered a mini boom with work stoppages causing mini recessions. Studies have found no measurable effects here.
Recent research applies methods used to estimate the value of endangered species to sports teams. These studies find, not surprisingly, that people value teams. Yet the value is small relative to the large subsidies cities provide for sports. Alabama, like many states, provides targeted incentives to businesses. Yet the non-sports incentives amount to about three percent of a company’s projected 20-year payroll. The $300 million in taxpayer subsidies for the Braves’ Truist Park amount to 11% of the projected Braves’ payroll over the next twenty years.
Sports add value to fans’ lives. Parks, nature trails, and professional sports improve Alabama’s quality of life and may be worth spending money on them. But decades of research demonstrate that pro sports represent consumption, not sources of economic growth.
Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University or of the policy and position of 1819 News. To comment, please send an email with your name and contact information to Commentary@1819News.com.
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