The Economic Impact of College Athletics on Local Economies

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The Economic Impact of College Athletics on Local Economies

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Title: The Economic Impact of College Athletics on Local Economies
An Empirical Approach from the U.S.
Author: Holmberg, Jennifer
Abstract: The popularity college athletics enjoys can be compared to the popularity of professional sports in the U.S. With bigger attendance figures than professional sports, college athletics is able to attract millions of fans and generate millions of dollars annually in revenue. Therefore, college athletics plays an important role for the U.S sporting culture and its local economy. Some research has been done on trying to find a positive linkage between college athletics and the economy (Baade, Baumann, & Matheson, 2011). This has however not been successful, which can be seen as a little surprising, since college athletics brings millions of dollars to the university and contributes to the economic activity in the local economy. This thesis has researched the economic impact Division I-A college athletics has on the metropolitan and state level economies. This has been done by looking at the impact college athletics has on the metropolitan and state GDP, as well as on the local employment. An ex-post analysis approach has been used by applying different econometrical methods of ordinary least squares, three stage least squares, instrumental variable and general methods of moments to tackle problems of reverse causality and endogeneity. To specifically find the impact college athletics has on GDP and not GDP’s impact on college athletics, an instrumental variable approach has been applied with using unexpected success (Olympics medals) as an instrument capturing the effect on college athletics The findings of college athletics impact on the economy are twofold. Whereas college athletics does not have a positive impact on the metropolitan economy, college athletics has a positive impact on the state economy. This can be attributed to the fact that many profitable universities are located in the same state but different metropolitan areas. Smaller universities might not be as profitable but can still have an impact on the metropolitan and state economies. Although college athletics fails to have an impact on the metropolitan economy, which can be due to the substitution and crowding out effect, the empirical findings show that college athletics has a positive significant impact on the state GDP. This study is among a handful of studies that have been able to find a positive relationship between college athletics and the state economy
URI: http://hdl.handle.net/10417/5698
Date: 2016-03-17
Pages: 77 s.
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