The Economic Impact of the World Series

The calls started last week, just like they always do this time of the year. A reporter from a newspaper or radio station in a city hosting a postseason sports contest calls and wants a quote on the fantastic economic impact that the upcoming game/series will have on the local economy. The “postseason” season is once again upon us.

From now until the NBA finals next June, the media will be full of outlandish claims about the positive economic impact of playoff games, championship games, NCAA basketball tournament regionals, et cetera. Typical estimates of the local economic impact of a MLB playoff series, generated by the chamber of commerce or visitor’s bureau, run from the tens of millions of dollars to the low hundreds of millions of dollars. These estimates should be taken with a grain of salt.

Dennis Coates and I published a paper in the Journal of Sports Economics (“The Economic Impact of Postseason Play in Professional Sports” – subscription required) a few years ago that looked for evidence that hosting a professional sports playoff game or series had any effect on the past economic performance of US cities. After controlling for other observable factors that might affect the local economy, we found that variation in playoff appearances did not explain any of the observed variation in real income per capita in any US city that was home to a professional football, basketball, or baseball franchise over the period 1969-1997. A recent working paper by Victor Matheson and Robert Baade finds similar evidence using a different approach. The economic impact of a postseason appearance is zero.

Note that this research does not find that there is no economic impact from postseason games. Bars and restaurants near ballparks will do a lot more business than they would have if the game was not played. Stores that sell jerseys, caps, and memorabilia will also enjoy increases in revenues. But this spending does not represent a net increase in economic activity in a city. Every screwdriver that Astro fans drink in bars near Minute Maid Park is a screwdriver not consumed somewhere else in Houston. Increased entertainment spending on gameday is just entertainment dollars that would have been spent somewhere else in the area, at some other time, if the game did not take place. Unless, of course, you believe that people draw down their life savings in order to finance tailgating before World Series games.

Claiming that a playoff game generates positive economic impact is similar to claiming that weekends generate positive economic impact. Imagine the headline in the business section: Bar, Restaurant Sales Surge on Friday and Saturday Night! Postseason appearances generate civic pride and contribute to fans and city residents feeling good about themselves and their home. They also give cities national and international media exposure that would not have taken place in the absence of postseason appearances. But a large body of evidence indicates that postseason play generates no significant economic impact on the local economy.

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Author: Brad Humphreys

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