Localized economic impact of sports stadium construction

A growing trend throughout the United States is an increasing willingness of cities to publicly finance professional sports stadiums. The stadiums are justified by tangible economic benefits, either citywide or specific to a targeted region through a revitalization plan. The citywide economic impact arising from a new professional sports stadium, when analyzed empirically, has been consistently found to have no statistical significance (Coates and Humphreys, 2000). More recently, empirical work has shifted towards research involving intracity spatial analysis, estimating the differential impact of a stadium by proximity. Research in this avenue has included work conducted by Carlino and Coulson (2004) analyzing rental rates, and Coates and Humphreys (2006) in an analysis of voting patterns. This paper adds to the literature by controlling for trends in alternative stadium locations within the same city, and in estimating local employment growth and business composition change due to a stadium. Using a dataset containing stadiums built from 1996 to 2014, spanning three professional sports leagues (National Football League, Major League Baseball, Class AAA Minor League Baseball), a difference-in-difference approach is used. First, the differential impact on a stadium site is estimated using the city as a whole as the control. Then, the alternative sites are used as the control. A very limited impact is found to occur in the ZIP Code in which a stadium is built when the city is used as a control, with the only estimated impact being an increase in the proportion of eating and drinking establishments by approximately .293 percent. Using the alternative site as a control, no employment or business composition effect is estimated to occur whatsoever. Thus, the findings indicate that the small impact that does occur in the region surrounding a stadium does not outweigh the opportunity cost of the stadium investment.