Bowl season is finally over. We know who was successful on the field — my alma mater West Virginia University, for one — but what kind of economic success will colleges and universities reap in the upcoming months as a result of the bowl season? As Skip recently pointed out, there is a perception that donations to a college or university respond to athletic success.
Over the past 20 years, sports economists have formally tested the hypothesis that athletic success leads to increases in donations to colleges and universities. I have a working paper, written with Micheal Mondello from Florida State University, that takes another look at this relationship. We analyze the determinants of restricted donations (those earmarked for a specific purpose) and unrestricted donations (those made to the general fund with no restrictions on use) at all 320 colleges and universities that played at least one season in NCAA Division I over a twenty year period.
We found that, at public universities, a bowl appearance this year was associated with an increase in restricted donations the following year by about 12% at the mean, and was not associated with any increase in unrestricted donations. An appearance in the NCAA men’s basketball tournament was associated with an increase in restricted donations the following year of about 8.5% at the mean and no increase in unrestricted donations. National championships in either sport did not increase donations of any kind. Neither did appearances in the final top 20/25 polls in football or basketball.
At private universities, NCAA men’s basketball tourney appearances were associated with about a 10% increase in restricted donations in the following year but bowl appearances had no effect on donations. A basketball national championship also led to an increase in restricted donations at private universities.
The donations variables have a lot of skew in them, as many colleges and universities get little or no donations in most years, and a few universities have enormous annual levels of giving. For schools with low annual restricted giving, the increase can be quite large. For example, the increase in restricted donations following a bowl appearance at a public university at the 25th percentile of the distribution was over 200%.
Universities appear to be able to parley athletic success into increased giving, but the additional donations do not go into the general fund. This finding is consistent with what has been found in the literature before by some studies. The results in my working paper are based on estimates from a panel data set with large n (=320) and t (=20) dimensions using a two-way fixed effects estimator. The empirical models control for variation in many observable and unobservable factors that might influence donations, and explain between 60% and 90% of the observed variation in donations across time and across schools.
Unfortunately, the data source (IPEDS) does not provide sufficient detail to determine where these restricted donations are targeted, but I speculate it’s the athletic department. On average, about 22 cents of every dollar of restricted donations to public universities goes to the athletic department.
The results indicate that public universities who appeared in bowl games this bowl season, especially those with low levels of annual giving, can expect an increase in donations next year. However, those additional dollars of giving will likely have strings attached, and may end up padding the athletic department budget, not the economics department.