Economic Impact Analysis of Sports Facilities and Events: Eleven Sources of Misapplication

Abstract

Many sports events, facilities, and franchises are subsidized either directly or indirectly by investments from public sector funds. The scarcity of tax dollars has led to growing public scrutiny of their allocation; in this environment there is likely to be an increased use of economic impact analysis to support public subsidy of these events. Many of these analyses report inaccurate results. In this paper, 11 major contributors to the inaccuracy are presented and discussed. They include the following: using sales instead of household income multipliers; misrepresenting employment multipliers; using incremental instead of normal multiplier coefficients; failing to accurately define the impacted-area; including local spectators; failing to exclude “time-switchers” and “casuals;” using “fudged” multiplier coefficients; claiming total instead of marginal economic benefits; confusing turnover and multiplier; omitting opportunity costs; and measuring only benefits while omitting costs.

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