Sports and (real) business cycles

Abstract

We extend a basic real business cycle model to incorporate households doing sports. Households decide on spending time at the workplace and spending time on doing sports. Sports acts as an investment in health and, thereby, affects total factor productivity. We study the implications of sports for the propagation of technology shocks and for the volatility and persistence of output at business cycle frequencies.

Keywords:

• sports
• business cycles
• technology shocks
• output volatility
• persistence

JEL Classification:

• E32
• I10
• J22

Acknowledgements

Part of this article was written while Alper Ҫenesiz visited the Helmut Schmidt University (HSU). The hospitality of the HSU is gratefully acknowledged. The authors declare no conflict of interest.

Notes

¹ Sports-related activities in a broader sense include, for example, maintaining sports facilities, sports-related services, production and merchandising of sporting goods, sports media, sports-related tourism, etc.

² Other researchers have studied empirically the macroeconomic effects of sports mega-events like the Olympic games. See Rose and Spiegel (2011), among others.

³ For classic contributions to this research, see Benhabib et al. (1991) and Greenwood and Hercowitz (1991).

⁴ The functional form of the utility is standard in the real business cycle literature. For a classic study, see Long, Jr. and Plosser (1983) or Hansen (1985).

⁵ We could include sports equipment in the model if c_t is interpreted as a basket of goods defined over conventional consumption goods and sports equipment. As long as the model does not feature a separate sports-business sector, modelling such a basket of goods would only add a further decision variable to the model without affecting its basic properties.

⁶ Eber (2003) suggests a quadratic function to model the contemporaneous link between household health and sports in order to capture the idea that this link may turn negative if sports exceeds a critical threshold. For recent research on the link between sports and health, see Schnohr et al. (2003) and Blair et al. (2004), among others.

⁷ See, for example, Hansen (1985), who employs similar values.

⁸ The real business cycle model obtains for . In order to make the results comparable across models, we set TFP in the nonstochastic steady state of the basic real business cycle model equal to the value of TFP in our model.