Abstract
In this paper, I review existing literature on the economic impacts of sports on regions that host such events. The focus is on the direct and indirect implications of hosting sporting events in various areas. I also address the adverse impacts of sporting events on the economy of the host nations. Furthermore, I examine how various stakeholders, including the governments, players, fans, and sports leagues, influence the economic outcomes of sporting events.
The Economic Impact of Sports
Introduction
In this paper, I examine the studies that critique the economic impacts of sports on the host cities and countries. The paper is a review of literature on how the hosting of sports events, directly and indirectly, benefits the host cities or countries. The focus is also on the adverse impacts of sporting events, such as how much it costs a city or country to host such events. The literature review further addresses how various sport stakeholders, including the government, fans, players, and club sponsors, influence the economic outcomes of sporting events in the host regions.
Direct and Indirect Benefits of Sporting Events
Kavetsos and Szymanski contend that many economists focus on the need to understand the economic benefits of hosting major sporting events (159). The authors argue that major sporting events often contribute to creation of more employment opportunities in the host cities or regions. They argue that in the short-term, major sporting events create job opportunities in the construction sector while creating employment opportunities in the tourism and restaurant sectors over the long-term. Kavetsos and Szymanski contend that major sporting events often boost tourism activities in the host countries or cities (160). Through advertising of major hosting events, host cities or countries tend to be given media exposure, thus enabling them to attract tourists before and after events. An increase in tourism activities tends to improve the host city’s or country’s economy significantly through an increase in revenue collection. The study establishes the relationship between the economic impacts of hosting major sports events and individuals’ life satisfaction (Kavetsos and Szymanski 164). The authors use data on self-reported life satisfaction for various European countries, including France, Germany, Britain, and Denmark. The aim is to examine whether or not hosting major sporting events has an impact on individuals’ life satisfaction. According to the study’s findings, hosting of major sporting events significantly impacts a host city’s or country’s economy and increases individuals’ life satisfaction.
Gratton, Shibli, and Coleman argue that hosting major sporting events often have long-term benefits to a host city or country (43). The authors argue that some of the benefits include newly constructed event facilities and infrastructure, urban revival, an enhanced international reputation, the creation of more job opportunities, increased tourism, improved public welfare, and increased inward investment. Gratton et al. opine that hosting major sporting events is also associated with various disadvantages to a host city (45). Major sporting events contribute to temporary traffic congestion problems, high construction costs of sporting avenues and other related investments, such as transport infrastructure, displacement of other tourists due to the event, and underutilized elite sporting facilities, which may be of little use to the local population after the event. The study attempts to examine the economic impacts of major sporting events by evaluating how the economy of various cities across the United Kingdom have been influenced before by such events. Some of the cities included in the study are Sheffield, Birmingham, Glasgow, and Bristol. The study’s findings are that major sporting events, such as World Half Marathon Championships (2001), World Indoor Climbing Championships (1999), and European Junior Boxing Championships (1997) impacted the economy of the mentioned cities positively and negatively during and after the events (Gratton, Shibli, and Coleman 47). The study argues that sporting events have diverse impacts on the economy of the host regions.
Ntloko and Swart contend that major sporting events contribute to social and economic impacts to host cities or regions (80). The authors assert that sporting events have economic benefits to local businesses within the host cities or regions and promote the cultural pride of the local communities. Ntloko and Swart argue that sporting events also contribute to negative environmental impacts and social inequalities between various areas in a host country. The study attempts to critique the economic impacts of major sporting events on the host regions and it evaluates the Red Bull Big Wave Africa (RBBWA) as a case study event (Ntloko and Swart 84). The study incorporates the use of the local community’s perceptions, attitudes, and understanding of the costs and benefits linked to the RBBWA event to determine how it contributes to social and economic impacts on host regions or countries. The study incorporated the use of survey questionnaires, direct observations, and interviews to gather relevant data from the host community to come up with its findings. According to the study’s findings, the sporting event contributed to social and economic impacts to the selected community (Ntloko and Swart 89). The study’s findings demonstrate RBBWA promoted the community’s local business and helped to promote the community’s culture. However, the study demonstrates that the event contributed to social inequalities between the community and other areas within the host country.
Li, Blake, and Thomas opine that major sporting events are increasingly used by policy-makers to stimulate economic development in various regions or countries (236). This has resulted in increased interests amongst scholars as they try to analyze how sporting events impact economies of various regions. The study by Li et al. assesses the economic impact of the Beijing Olympics, particularly to China’s tourism sector. The study incorporates a computable general equilibrium to determine the impact of the sporting event on China’s tourism sectors. According to the study, the Beijing Olympics impacted China’s economy, particularly the tourism sector in various ways. The events created more job opportunities in the tourism sector and led to an increase in the number of tourists visiting the country (Li et al. 240). However, the study’s findings demonstrate that the economic impacts of the sporting event were insignificant compared to the total size of the country’s economy.
Dwyer, Forsyth, and Spurr also explore the economic impacts of sporting events. In their study, Dwyer et al. use a computable general equilibrium to evaluate how special sporting events impact the economy of various regions or countries. The article illustrates several differences between the alternative forms of analysis in the event assessment (Dwyer et al. 62). These include assessing the differential impacts of sporting events on the host regions and surrounding regions. According to the study’s findings, sporting events impact various regions depending on the extent of integration between the regional and national resource markets and regional and national product and services market.
Fourie and Santana-Gallego examine how host regions benefit both directly and indirectly from mega-sporting events (1365). By using a standard gravity model of bilateral tourism flows, the study by Fourie and Santana-Gallego examines how mega-sporting events have direct economic impacts on the host regions. The study assesses if mega-sporting events have led to an increase in tourist arrivals in the countries that have hosted such events from 1995 to 2006 (Fourie and Santana-Gallego 1366). According to the study’s findings, mega-sport events promote tourism activities in the host regions depending on the type of the mega-event and the type of country that hosts the event. Another factor that determines tourist activities in a host region is whether the mega-sport event occurs during the peak season or off-season.
Rose and Spiegel assert that mega-sporting events such as the Olympic Games are accompanied by huge investment costs surpassing the revenues earned (80). The implausibility of recovering from such events is a reason for many economists’ reluctance and doubts regarding hosting such games. Rose and Spiegel argue that although the sporting events adversely impact host regions, the events help to promote international trade (80). Rose and Spiegel examine how mega-sport events help to promote trade in countries that host the events and nations that may have failed in their bid to host the games. The study uses trade patterns to compare the impact of mega-sport events between countries that host the events and those that might have had their bid to host the games unsuccessful (Rose and Spiegel 82). The findings show that mega sporting events promote international trade in countries that host the games and those that may have had their bids to host the events unsuccessful.
Gratton, Dobson, and Shibli aver that many cities regard sporting events as a significant part of the tourism strategy (17). The study by Gratton et al. assesses the economic impact of six major sporting events that were held in the United Kingdom in 1997 to support its claim (18). According to the study’s findings, sporting events positively and negatively impact the economy of various regions. The findings demonstrate that the positive impact of sporting events on the economy of host countries is that they promote tourism activities. However, the study’s findings reveal that hosting sporting events come with additional costs. For a city or region to host a sporting event, it has to invest in transport infrastructure and urban revival. Thus, the cost of such investments must come from the taxpayers, underlining the adverse impacts on taxpayers.
Adverse Economic Impacts of Sporting Events
According to Lertwachara and Cochran, the use of incentives, such as the state-of-the-art stadium or tax exemptions, to induce a major professional team to relocate or remain in its area is a common practice (244). Lertwachara and Cochran contend that many cities often compete in hosting major sporting events or professional teams with a notion that they teams or events can help to improve their local economies (244). Lertwachara and Cochran believe that since these cities use a lot of tax revenues to pay for the incentives offered to these teams, it is prudent to investigate the net effect of the professional sports franchises on the economic welfare of the local taxpayers of those regions (244). Therefore, the study by Lertwachara and Cochran examines both the short and long-term economic impacts of professional sports franchises on the welfare of the local taxpayers. The study evaluates whether there exists a relationship between the income of individuals within a city and the expansion and relocation of a professional sports franchise. Using the event study model, the authors attempt to evaluate both income per capita and its growth rate whenever a professional sports franchise expands or relocates to a particular city. The study concentrates on four major professional sport leagues including the National Hockey League (NHL), National Football League (NFL), National Basketball Association (NBA), and Major League Baseball to establish how sports impact the U.S economy (Lertwachara and Cochran 247). According to the study’s findings, the four major leagues often harm the economic welfare of the taxpayers and local per capita income in the U.S markets both in the short- and long-term.
How Other Stakeholders Influence Economic Outcomes of Sports
According to Preuss, host cities and regions often spend huge amounts of money on building sporting facilities, improving their transport infrastructure, and other related investments in preparation for major sporting events. Preuss argues that the main economic benefit for a region derives from the consumption by visitors during the events and increased tourism activities in the post-event period (284). Preuss, in his study, argues that an increase in tourism activities can help to improve a country’s economy by approximately 40 percent over time (284). A few studies explore the economic impact of hosting major sporting events due to the lack of knowledge on consumption patterns of visitors and the number of people visiting such regions or cities during and after the events. The study by Preuss examines how the consumption patterns of visitors and the number of people who visit a particular city or country during and after the major sporting events impact the economy of such regions. The study further examines how the economy of the city of Manchester, Britain, was impacted by the 2002 Commonwealth games (290). The study’s findings are that the consumption patterns of visitors and the number of people who visited the city during the sporting event significantly enhanced the economy of the city. The author also argues that the city of Manchester has experienced an increase in tourism due to the event and other sporting events as well.
Baade, Baumann, and Matheson also critique how professional sports leagues, franchises, and civic boosters often use major sporting events as an incentive for host cities or regions to construct new sports arenas or stadia at considerable public expense (794). According to Baade, Baumann, and Matheson, major sporting events, such as the Super Bowl and all-star games, have increased the economic activities in host cities by hundreds of millions of dollars (794). Baade et al. argue that new stadiums or arenas constructed as a result of a sporting event can also significantly impact a city’s local economy by contributing hundreds of millions of dollars through taxable sales. The study examines how sporting events have significantly impacted Florida’s economy from the period between 1980 and 2005 (Baade et al. 799). The study uses detailed regression analysis of taxable sales to support the claims that sporting events can have a significant impact on a region’s or city’s economy. According to the study’s findings, new stadiums and arenas are likely to increase taxable sales over a short period, probably during the sporting events, and in the long run, they are likely to reduce the taxable sales (Baade et al. 806). This implies that new stadiums and arenas can improve a region’s economy by hundreds of millions during sporting events resulting from an increase in taxable sales. The study asserts that hosting sporting events can improve a region’s economy through increased tourism activities. Florida has encountered an increase in tourism activities as a result of various sporting activities it hosted in the past.
Nesbit and King examine how fantasy sporting events also impact the economy of countries or cities (95). According to Nesbit and King, the fantasy football industry has reportedly grown to 18 million unique players and has helped generate over 2 billion dollars (95). Nesbit and King argue that fantasy sports enhance individuals’ interests in particular sporting events, such as the national football league. Therefore, the study determines how fantasy sports help in the increase in the number of individuals who attend NFL games across the United States. The study uses survey data for the ESPN sports poll to support its hypothesis. According to the study’s findings, fantasy football participation enhances individuals’ interests in NFL games (Nesbit and King 106). Thus, an individual is likely to attend many NFL games per season. This, in turn, translates to economic benefits for the cities or regions that host the NFL games.
Veltri, Miller, and Harris examine how recreational sporting events have economic benefits, and many cities across the United States are often competing to host such events (120). The authors argue that smaller sporting events receive minimal attention across the country since they have less economic impacts. This study thus examines the economic impacts of hosting the American Collegiate Hockey Association (ACHA) Division II National Championship in a midsize community of Fort Collins, Colorado. The study’s findings show that the sporting event positively impacted the community’s economy by enabling it to generate revenues approximately $2 million (Veltri et al. 126). The study asserts that sporting events have positive economic impacts regardless of their size.
Lee and Taylor assert that Sports tourism has received increased attention as it is a source of revenue and contributes to economic effects on the host cities and countries (596). The authors contend that the benefits of sport tourism depend on the type of mega-event hosted within a region. This study evaluates how South Korean economy was significantly impacted by the 2002 FIFA World Cup. According to the study’s findings, the major sporting event positively impacted the South Korean economy by contributing to a significant increase in the number of tourists and increasing the amount of revenues generated. The study demonstrates that the number of tourists who visited the country increased by 57.7 percent during that event and the country generated $1.35 billion of output sales and $713 million of value-added tax benefits. The study contends that the sporting event largely benefitted the country during and after the event.
According to Preuss, tourist expenditures constituted the largest part of South Africa’s economy when it held the 2010 World Cup (368). The 2010 World Cup led to an increase in tourist arrivals in South Africa, although it resulted in crowding-out effects. The study examines the crowding-out effects which were experienced in South Africa during and after the 2010 FIFA World Cup. Thus, the study incorporates the use of econometric model to evaluate the statistics related to the visiting tourists. The study’s findings demonstrate that the event led to a reduction in investments by businesses because the government spent heavily on the event (Preuss 379). The findings also reveal that the event led to deficit financing, siphoning the available financial resources, and contributing to a rise in interest rates.
According to Farrell and Shields, sporting participation is positively related to household income (336). The study by Farrell and Shields justifies this claim by examining the demographic and economic factors that determine sporting participation in England. The study incorporates the use of random-effects probit models to evaluate the factors that impact sport participation in England (Farrell and Shields 339). The models incorporated in the study also take into account the respondents’ economic and demographic characteristics. The study’s findings demonstrate that sporting participation in England is positively related to household income. The study also argues that household preferences play a key role in sporting participation.
According to Ratten, entrepreneurship and sport management disciplines have grown in the recent past (58). Sport is an entrepreneurial process that involves aspects such as innovation and change. The study assesses the connection between entrepreneurship and sporting events. The study established sport-based entrepreneurship model to allow the authors to examine how various dynamic aspects such as product innovation, promotional strategies, crisis management and performance management occur in sports. The study argues that businesses can adopt these dynamic aspects, ultimately translating to economic benefits to the regions or cities that host particular sporting events.
Conclusion
Mega-sporting events are increasingly receiving attention across the world due to their substantial economic impacts on the host regions. Due to their economic benefits, many cities or countries compete to host events, such as the FIFA World Cup and Olympic games. The benefits of hosting such games are that they can help to create job opportunities, increase revenue collection in the tourism sector, and promote international trade. However, economists are often skeptical about such events, given the minimal benefits associated with them.
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