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A Note on the Local Economic Impact of Sports Expenditures

Vanderbilt University

Andrew Zimbalist

Smith College

Public subsidies for sports stadiums and arenas are often justified as a means to boost thelocal economy. The argument relies on historical local economic impact multipliers thatmisrepresent the effect of consumer expenditures on professional sports. Sports expenditures are subject to extraordinary consumer substitution away from other local expenditures, and they suffer unusually large first round leakages from the local economybecause, inter alia, players export their earnings to the locale of their permanent residence. This note illustrates the extent of such leakages using information about the permanent residence of players in the National Basketball Association. While 93% of averageemployees live in the area where they work, only 29% of NBA players do the same. Theillustration shows that a standard local economic impact multiplier exaggerates the stimulative effect of sports expenditures by over 400%.

Key Words: local economic impact of sports

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