Document Type

Working Paper

Date of This Version

12-1-2018

Keywords

stadiums, arenas, subsidies, sports, tourism

JEL Classification

Z28, O18, R53

Abstract

In recent decades, governments have committed enormous public resources to subsidize construction of new stadiums, and the dollar value of taxpayer contributions for these subsidies continues to climb. Spending of taxpayer dollars includes both direct subsidies from state and local governments, as well as indirect subsidies from the use of tax-exempt bonds to finance construction. In granting stadium subsidies, governments claim that the stadiums are a public good that attracts tourists and businesses, thereby generating increased spending and job creation—benefits that flow to the community rather than to team owners. But do such benefits exist, and are they large enough to justify the scale of the subsidies? Brad Humphreys, Professor of Economics at West Virginia University, and Victor Matheson, Professor of Economics at the College of the Holy Cross, address the wisdom of public funding of sports stadiums based on the evidence. Brad argues that stadiums should not be subsidized by taxpayers, as the evidence fails to identify any tangible economic benefits generated by stadiums, and a growing body of evidence reveals that stadiums also generate additional local crime, pollution, and congestion. In contrast, Victor argues that while the economic benefits of a new stadium are probably not high enough to justify a taxpayer subsidy of the full construction costs, the benefits may be enough to justify covering some fraction of the costs. Furthermore, governments may use the subsidies to achieve desired development in targeted neighborhoods.

Working Paper Number

1814

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