Professional sports as economic activity magnets: Some evidence from employment microdata

ABSTRACT

Proponents of subsidies for professional sports argue that new sports facilities can revitalize neighborhoods, because they attract large crowds of people and thereby act as magnets of economic activity. The existing literature on sports and economic development does not falsify the economic activity magnet hypothesis, however. This study offers a test of the magnet hypothesis using employment microdata for establishments within the vicinity of a Major League Soccer stadium in Commerce City, Colorado. No evidence is found that the construction of the stadium is associated with increased economic activity in its vicinity measurable in terms of jobs, nor is there any evidence that the franchise’s relocation is associated with job losses at establishments closer to its prior home compared to further away.

Acknowledgments

I am indebted to the reviewers who provided multiple rounds of constructive feedback. All remaining errors are my responsibility alone.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. The author has downloaded aerial imagery of the project site and its 3-mile radius at the beginning and end of the observation period using Google Earth. These images are available upon request.

2. The neighborhood was previously known as Prairie Gateway.

3. Promotional material for the neighborhood is available from the author upon request. Commerce City financed construction of a municipal building near the stadium contemporaneously. However, the jobs data used in this analysis are private-sector jobs only.

4. It is possible that the variable for number of establishments in a census tract is endogenous with the regression residual. However, any potential bias in the parameter estimate would be largely contained to the endogenous variable. Because the variable of interest is not the number of establishments, bias in the parameter estimate is not important. To evaluate the extent of potential bias, however, Equation 1 was estimated with and without the variable, and the coefficient for the DD interaction was not statistically different from zero in both cases. Results are available upon request.

5. It is not possible to link establishments over time using addresses because of multi-establishment addresses and inconsistencies in business name spellings and name changes. A business with the same address could be linked over time if name spellings are similar enough using fuzzy logic programs. However, in the case of business names or too dissimilar name spellings, researchers would have to investigate each business in the data set to find its appropriate match over time. This is usually cost prohibitive in terms of time. Transforming the QCEW into a true panel data set for other scholars remains one of the present author’s ongoing and long-time projects.

6. The QCEW is also useful as a general data source because it contains employment measured monthly and wages measured quarterly, unlike NETS, which measures jobs annually and the timing of the measurement (that is, when during the year the observation is made) is not reported to the user. A more thorough discussion of the advantages of QCEW (and other government-sponsored databases) over NETS is available in Barnatchez, Crane, and Decker (2017). It is hoped that this study inspires scholars elsewhere to explore establishment-level QCEW files in future economic development research.

7. An alternative explanation is that the placebo tests are capturing residual effects due to stadium construction announcement. Because the project was announced in 2004, however, pre-announcement data are not available, and thus announcement effects cannot be estimated.

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Notes on contributors

Geoffrey Propheter

Geoffrey Propheter is an Assistant Professor in the School of Public Affairs at the University of Colorado Denver. His research interests are in state and local public finance, land and economic development, and sports and public affairs.