15 - Public Estimating Economic Impacts I Flashcards
Why are aggregate economic impacts of sports often smaller than expected?
Due to substitution, crowding out, and leakages — people shift spending from other activities, local resources get overused, and money often leaves the region.
What is the substitution effect in sports economics?
When people spend more on sports, they usually spend less on other entertainment (like dining or movies), leading to no net increase in total spending.
Aggregate economic impacts are
smaller primarily due to:
* Substitution
– E.g. If people consume more sports, they
reduce expenditure on other entertainment.
* Crowding Out
– E.g. There are capacity constraints within a
city/region.
* Leakages
– E.g. Much expenditure will leave the
city/region.
* The biggest economic effects
involve microeconomic shifts,
rather than macro ones.
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Economic impact of sports
What does crowding out refer to in the context of sports events?
Local capacity constraints (e.g. hotels, transport) can prevent other activities from taking place, limiting the net benefit of the event.
What are leakages in economic impact analysis?
Expenditures that leave the city/region — like profits to out-of-town owners or national vendors — which reduce local economic gains.
What type of economic effects do sports typically produce?
Mainly microeconomic shifts, not macroeconomic ones. The overall impact on GDP or employment is usually minimal.
What is the goal of estimating the economic impact of a sports event?
To establish a causal relationship between the event and economic outcomes like income, employment, or business activity.
What is a key methodological challenge in economic impact studies?
Identifying causality, not just correlation — i.e., proving the event actually caused the economic change.
What are six common methods economists use to estimate causality?
Experiments (RCTs), Natural Experiments, Panel Data Methods (e.g., Diff-in-Diff), Matching-based Methods, Instrumental Variables, Time Series Methods.
What is a natural experiment in sports economics?
An unplanned event (e.g., rain canceling games) that creates random variation, which can be used to estimate causal effects.
What is Difference-in-Differences (Diff-in-Diff)?
A method that compares changes in outcomes over time between treated and untreated groups to estimate impact.
What is a matching-based method?
A method that pairs similar units (e.g., cities or teams) to isolate the treatment effect more accurately — e.g., regression discontinuity or propensity score matching.
What role does variation play in estimating economic impact?
Variation in the event or economic outcomes is essential. Without it, causal effects cannot be measured.
What are examples of poor variation in data?
Highly aggregated data (like national-level or yearly data) or few time periods — these limit the precision and power of analysis.
What was the empirical strategy in Approach #1 from the slides?
Use variation in the number of home college football games across cities, and examine their impact on income and employment.
What were the economic outcomes analyzed in Approach #1?
Growth in real personal income, Growth in employment, Growth in real per capita income.
What data was used in the Approach #1 study?
63 MSAs (Metropolitan Statistical Areas), Years: 1969–2004, Included schools from all 6 BCS conferences + Notre Dame, Observations at the MSA-year level.
What were the findings of the Approach #1 analysis?
No statistically significant economic effect of college football games on income or employment was found.
How can the economic impact of a sporting event be measured econometrically?
✅ Main Goal:
To estimate a causal relationship between a sporting event and an economic outcome (like income, employment, tourism, etc.)
Estimating economic impact involves establishing a
causal relationship between a sporting event, and an
economic outcome
How Do Economists Establish Causality?
- Experiments (Randomized Controlled Trials)
Rare in sports, but ideal for causality.
Randomly assign treatment (e.g., hosting rights) and compare outcomes.
- Natural Experiments
Use unplanned or random events (e.g., weather disruptions, last-minute event cancellations).
Can mimic randomization to estimate effect.
- Panel Data Methods
Especially Difference-in-Differences (Diff-in-Diff)
Compare changes over time between treated and untreated units
Example: Compare employment trends in a host city vs. a similar non-host city
- Matching-Based Methods
Match treated and control units based on observable characteristics.
Examples:
Regression Discontinuity Design
Propensity Score Matching
- Instrumental Variables (IV)
Use a variable that affects the sporting event but does not directly affect the outcome.
Helps solve endogeneity or omitted variable bias.
- Time Series Methods
Analyze economic data over time to see if the sporting event creates a structural break or predictive pattern.
Examples: ARIMA, Granger Causality
To accurately estimate economic impact, you need variation and a strategy that allows you to control for confounding factors and identify causality — not just correlation.
Approach 1#
