The impact of Formula 1 on regional economies in Europe

ABSTRACT

The tangible effects of hosting major sporting events have been thoroughly examined in recent years. The consensus among scholars is that the effects on tourism, inbound foreign investments and gross domestic product (GDP) from hosting, for example, the Olympic Games or the football World Cup are absent. Further, only a few studies have been conducted on one of the most commercially successful (major) sporting events: Formula 1 motor racing. This paper applies regression models to test the effects on GDP, employment and tourism in European regions that have hosted Formula 1 grand prix from 1991 to 2017. The output from the models suggests that hosting Formula 1 races does not produce positive effects.

KEYWORDS:

• Formula 1
• economic impact
• Europe

JEL:

• H41
• L83
• Z23

ACKNOWLEDGEMENTS

The authors thank the two anonymous reviewers for their constructive comments on earlier drafts of this paper.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

Notes

1. See https://en.wikipedia.org/wiki/Grand_Prix_motor_racing.

2. Australia, Bahrain, China, Azerbaijan, Spain, Monaco, Canada, France, Austria, Britain, Germany, Hungary, Belgium, Italy, Singapore, Russia, Japan, the United States, Mexico, Brazil and the United Arab Emirates (UAE). Source: www.formula1.com.

3. See http://www.independent.co.uk/sport/motor-racing/formula1/f1-revenue-loss-cut-liberty-media-first-year-ferrari-mercedes-a8189876.html.

4. See http://www.circuitoftheamericas.com/economic-impact.

5. See https://www.forbes.com/sites/csylt/2017/03/13/the-1-billion-cost-of-hosting-an-f1-race/#462bab2b4f79.

6. See https://bleacherreport.com/articles/2270347-abu-dhabi-grand-prix-2014-10-key-facts-about-yas-marina-circuit#slide1.

7. A variation of this problem is highlighted by Dwyer et al. (2005), who argue that ‘When there is an increase in spending in the economy from visitors from abroad, the exchange rate will be bid up, discouraging exports and economic activity in other parts of the economy’ (p. 353).

8. This includes Baden-Württemberg, Cadiz, Emilia-Romagna, Leicestershire, Liege, Lisbia, Nièvre, Rheinland-Pfalz, Steiermark and Valencia.

9. The span of the investigated period is chosen due to the format of the available Eurostat data.

10. As can be seen in Table A1, there are some cases of circuits with sporadic hosting, such as in Belgium and the two locations in Germany. If this is somehow connected to GDP or tourism issues, it could potentially create a problem for the analysis. We searched for information on these issues, only finding sporadic information. Regarding the German tracks, this on-and-off host status is due to a biennial swap deal between Hockenheimring and Nürburgring. No information indicates that this deal is connected to issues related to GDP or tourism. The swap deal, in fact, makes the analysis stronger because it is possible to compare years with and without races. With regard to the Belgium race track, it appears that it was dropped in 2006 due to maintenance issue.

11. Numbers are from 2016.