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Newspapers are replete with accounts of the purported economic impact of various events. Sometimes the subject is a permanent change—a new casino, motor speedway, or hall of fame. Other stories describe a recurring event (a trade show, marathon race, golf tournament) or a sporadic one (a national political convention or the production of a Hollywood film). The sports industry is one that frequently makes claims that it enriches communities. For instance, the National Football League estimates the value of being the host city for one of its Super Bowls at more than $400 million, while major league baseball pegs the impact of its annual All-Star Game at $60 million to $80 million.
Colleges and universities make similar claims regarding how many jobs they create locally and how much a city or state benefits from their presence in terms of purchasing power or tax revenues. These economic-impact studies, generated by individual campuses or professional associations, can be viewed as mechanisms to persuade the citizenry of the value of campuses’ presence, including positive spillover effects. The studies also help institutions compete more effectively for state funding (or to resist proposed cutbacks), maintain their tax-exempt status, fend off criticism, or bolster fund-raising.
John J. Siegfried is a professor of economics at Vanderbilt University, where he teaches antitrust economics and the economics of sports. Allen R. Sanderson is a senior lecturer in economics at the University of Chicago, where he teaches introductory economics and the economics of sports. Peter McHenry is a Ph.D. student in economics at Yale University. This essay, written with financial support from the Andrew W. Mellon Foundation, is an abbreviated and modified version of an article the authors published in the October 2007 issue of the Economics of Education Review. Parts of that article are reproduced here with the permission of the Review, whose publisher retains the copyright.
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