by Declan Jordan

There is a sizeable literature on the economic impacts of major sporting events. Robbie Butler has shown in previous posts such as here and here that the evidence suggests that hosting major sports events, such as the World Cup and the Olympics, rarely pay for themselves financially.

There is an interesting contribution to the literature on the economic effects of hosting major events in the latest issue of Kyklos. An article by two Turkish economists, Veysel Avsar and Umut Unal, looks at the effects on trade between host and participating countries at FIFA World Cups. The article can be accessed here, though there is open access earlier version on SSRN here.

The paper finds strong evidence for a trading effect of the World Cup using bilateral trade data for 196 countries between 1950 and 2006. Pointing to the showcase effect of hosting the World Cup and the opportunities it provides for developing networks and trade channels, the paper finds that the World Cup significantly increases exports from participant countries to host countries and that trade is higher for host participant pairs compared to other country pairs. The authors find that the effects are decreasing over time. A personal view is that this may reflect the diminishing importance of showcase effects as the cost of information and communication diminishes in an increasingly digital society.

The paper is an interesting contribution to the literature and points to economic effects that may be under-appreciated or overlooked in the studies of big event impact analysis.

By John Considine

Ask most sports people about the movie Any Given Sunday and they will recall the Al Pacino “inches” speech.  The
“inches” speech evokes strong emotions.  It is what we like to believe sport is all about.
 
But, it is not by accident that Oliver Stone ends the movie by tying up the loose ends of the business of sport.  To the surprise of some, Pacino and his new found star quarter-back move on to a new club – where presumably they have got a better deal.  Cameron Diaz got a new stadium deal with the City of Miami after threatening to move the ball club.
 
The value of teams and stadiums to a city is a constant theme in the economics of sport.  The conventional wisdom is  that the benefits of a major league franchise to a city are overstated.  To date, the majority of the research suggests that major league teams extract resources from cities – frequently in the form of stadium upgrades.  But what about the minor leagues?  This is where the research of Nola Agha on minor league baseball comes into play.
 
In a recent article in the Journal of Sports Economics, Agha suggests that there could be some positive impact for teams and stadiums below the level of the major leagues. Agha examined the economic impact of teams and stadiums in minor league baseball.  While she found that the impact was insignificant for the majority of cases she did find some positive impact on per capita incomes.
 
In terms of teams, she found positive effects of AAA teams and A+ teams.  She suggested the positive impact  occurred because of the isolated nature of teams and lack of alternative professional sporting event experience.

In terms of stadiums, she found that AA stadiums and rookie stadiums had a positive impact on local per capita income.  While the direct impact from sport was limited because of low utilisation, she argued that the positive effect arose because the stadiums were utilised for other events, urban development and/or improving the image of the area.

Agha's article is one that is likely to be cited by many a Cameron Diaz as they seek finances for their sports ventures.

By John Considine

Last month, Inland Fisheries Ireland (IFI) published a Socio-Economic Study of Recreational Angling in Ireland.  The study produced a variety of numbers to illustrate the importance of angling to Ireland.  Direct expenditure on recreational angling in 2012 amounted to €555m. The combined direct and indirect economic impact was €755m.  Recreational angling was estimated to support 10,000 jobs.  And, it estimated that 7% of the Irish population aged 15+ participated in angling in the last year.  These are pretty impressive figures.

The above paragraph reads like a press release. It presents the case in a good light. It is similar to what we do when we compose our CVs.  We also tend to dress-up for an interview, a social event, or a Court appearance. Inland Fisheries Ireland (and Tourism  Development International) has put together a good piece of work.  They highlight the positive.

The report is also upfront about the assumptions made.  While we can argue about some of the assumptions made, a good report does not obscure the assumptions from the reader willing to put in the effort to read more than the press release.  IFI have done well in this regard.

What are the assumptions people might question?

The study states that “transport costs (both to Ireland and within the country) have been included in the expenditure information shown and account for 25% of total spending on the trip under review”. In other words, it would include the air fare of a German angler who took a British Airways flight to Ireland. Most economists would  question whether such an air fare should be included.

The study uses Failte Ireland estimates that €1 million of tourist spending supports 36 jobs.  The study says that the €106m of expenditure by overseas anglers and the €15m of expenditure by Northern Ireland anglers “can legitimately be classified as tourist spending”.  Why is the word “legitimately” used?  Is it because the study then goes on to talk about “domestic tourists”?
 
The study describes domestic tourists as those Irish citizens who undertake overnight trips.  Many economists might question whether these individuals should be classified as tourists.  They might point out that this “domestic tourist” expenditure does not account for the substitution effect.  In other words, an angler from Wexford may spend €100 in Galway to the benefit of the local Galway economy, but, it means that this angler is substituting expenditure in Galway for expenditure that was likely to take place in Wexford.  Galway may gain but Wexford loses out.  Ireland does not gain by €100.

One other point about this interesting study is worth noting.  Inland Fisheries Ireland must be complemented on not excluding sea fishing.  While the inclusion increases the overall value of angling it does tend to show freshwater fishing is a relatively poor light.  This is especially so when one considers that for “Anglers on Overnight Fishing Trips” the largest demand is for (a) Sea Fish (excluding bass) and (b) Sea Trout or Salmon.  Both categories accounted for 22,000 trips.

It might seem ironic that an Inland Fisheries authority would highlight the demand for sea fishing.  This could be a function of the disposition of those associated with fishing.  The recreational anglers I know love sharing information.  Even though they often go fishing alone but they love nothing better than sharing information that might help their colleagues.