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An analysis of the economic rationale for public subsidization of sports stadiums

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Proposals to provide public subsidy to sports stadiums are being debated in many locales. This paper examines a number of types of benefits asserted by proponents of subsidies: direct municipal revenues from stadium events; multiplier benefits increasing income and sales in the area; the attraction of unrelated business activity; and, intangible benefits. The business attraction argument is subjected to empirical test with regression analysis. In only a small fraction of the cases examined does manufacturing activity in an SMSA correlate significantly with the presence of a new or renovated stadium. We conclude that measurable economic benefits to area residents are not large enough to justify stadium subsidies and that the debate must turn to immeasurable intangible benefits like fan identification and civic pride.

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Baade, R.A., Dye, R.F. An analysis of the economic rationale for public subsidization of sports stadiums. Ann Reg Sci 22, 37–47 (1988).

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