Andrew Zimbalist

Sports, jobs, and taxes : the economic impact of sports teams and stadiums

This book examines the economic impact of new stadiums or a sports franchise on the local economy. It explores such general issues as the appropriate method for measuring economic benefits and costs, the source of the bargaining power of teams in obtaining subsidies from local government, the local politics of attracting and retaining teams, the relationship between sports and local employment, and the importance of stadium design in influencing the economic effects of a facility. The book also contains case studies of major league sports facilities in Baltimore, Chicago, Cincinnati, Cleveland, Indianapolis, San Francisco, and the Twin Cities and of minor league baseball stadiums and spring training facilities. The primary conclusions are the sports teams and stadiums are not a source of local economic growth and employment; the size of the net subsidy exceeds the financial benefit of a new stadium; and cities are probably willing to subsidize sports teams because of the intense popularity of sports among a substantial proportion of voters and businesses and the leverage that teams enjoy from the monopoly position of professional sports leagues.

Testing Causality Between Team Performance and Payroll The Cases of Major League Baseball and English Soccer

The link between team payroll and competitive balance plays a central role in the theory of team sports but is seldom investigated empirically. This paper uses data on team payrolls in Major League Baseball between 1980 and 2000 to examine the link and implements Granger causality tests to establish whether the relationship runs from payroll to performance or vice versa. While there is no evidence that causality runs from payroll to performance over the entire sample period, the data shows that the cross section correlation between payroll and performance increased significantly in the 1990s. As a comparison, the paper examines the relationship between pay and performance in English soccer, and it is shown that Granger causality from higher payrolls to better performance cannot be rejected. We argue that this difference may be a consequence of the open market for player talent that obtains in soccer compared to the significant restrictions on trade that exist in Major League Baseball.

Competitive Balance in Sports Leagues: An Introduction

Competitive balance is like wealth. Everyone agrees it is a good thing to have, but no one knows how much one needs. Economic theory tells us that the optimal level of balance in a sports league is a function of the distribution of fan preferences, fan population base, and fan income across host cities. Profit maximizing teams will accumulate units of talent until the marginal revenue per win is equalized across all teams. This implies that in leagues with a fixed supply of teams (and monopoly or duopoly team rights to a territory), the league will maximize revenues when teams from large, rich, and fan-intense cities win more often. In his seminal 1956 article, Rottenberg, among other things, anticipated the relevance of the Coase Theorem (Coase, 1960) in understanding talent distribution across teams and argued that the profit motive would limit the accumulation of player talent on any single team. El-Hodiri and Quirk (1971), in the first formal modeling of a professional sport league, find that individual team profit maximization is inconsistent with equal playing strengths among the teams except in the special case of identical team revenue functions. Fort and Quirk (1995) focus on the problem of competitive balance in sports leagues and assess the degree to which different mechanisms create greater balance. Based on the Coase Theorem, they conclude that neither the reserve clause nor the reverse-order amateur draft aid balance. Explicitly assuming that gate revenue grows in proportion to the home team’s playing strength, that each team faces the same cost per unit of playing strength, and implicitly assuming that owner risk aversion is invariant to team revenue and that cross subsidies are proportional to team revenue and not team rent, Fort and Quirk also conclude that increased revenue sharing will not improve competitive balance. The only mechanism in their

A Note on the Local Economic Impact of Sports Expenditures

Public subsidies for sports stadiums and arenas are often justified as a means to boost the local economy. The argument relies on historical local economic impact multipliers that misrepresent the effect of consumer expenditures on professional sports. Sports expenditures are subject to extraordinary consumer substitution away from other local expenditures, and they suffer unusually large first round leakages from the local economy because, inter alia, players export their earnings to the locale of their permanent residence. This note illustrates the extent of such leakages using information about the permanent residence of players in the National Basketball Association. While 93% of average employees live in the area where they work, only 29% of NBA players do the same. The illustration shows that a standard local economic impact multiplier exaggerates the stimulative effect of sports expenditures by over 400%.

Competitive Balance in Sports Leagues

Competitive balance is like wealth. Everyone agrees it is a good thing to have, but no one knows how much one needs. Economic theory tells us that the optimal level of balance in a sports league is a function of the distribution of fan preferences, fan population base, and fan income across host cities. Profit maximizing teams will accumulate units of talent until the marginal revenue per win is equalized across all teams. This implies that in leagues with a fixed supply of teams (and monopoly or duopoly team rights to a territory), the league will maximize revenues when teams from large, rich, and fan-intense cities win more often. In his seminal 1956 article, Rottenberg, among other things, anticipated the relevance of the Coase Theorem (Coase, 1960) in understanding talent distribution across teams and argued that the profit motive would limit the accumulation of player talent on any single team. El-Hodiri and Quirk (1971), in the first formal modeling of a professional sport league, find that individual team profit maximization is inconsistent with equal playing strengths among the teams except in the special case of identical team revenue functions. Fort and Quirk (1995) focus on the problem of competitive balance in sports leagues and assess the degree to which different mechanisms create greater balance. Based on the Coase Theorem, they conclude that neither the reserve clause nor the reverse-order amateur draft aid balance. Explicitly assuming that gate revenue grows in proportion to the home team’s playing strength, that each team faces the same cost per unit of playing strength, and implicitly assuming that owner risk aversion is invariant to team revenue and that cross subsidies are proportional to team revenue and not team rent, Fort and Quirk also conclude that increased revenue sharing will not improve competitive balance. The only mechanism in their

Competitive Balance Conundrums: Response to Fort and Maxcy's Comment

Fort and Maxcy misrepresent my argument at various points and misapprehend the nature of the competitive balance issue. The analysis of competitive balance needs to be informed by theory. Purely empirical exercises are unlikely to enhance our understanding of the importance of competitive balance to team sports leagues.

Reflections on Salary Shares and Salary Caps

This article takes a closer look at salary and revenue figures for the four major professional sports in the United States. It shows that the reporting typically offered in the popular media and often picked up in academic work can be rather misleading. The article first considers the conundrums in defining player compensation and then those connected to revenue. On the basis of adjusted data, the article proceeds to look at salary shares in revenue across the four leagues and considers the irony that the salary share in Major League Baseball (MLB) appears to be lower than the three leagues with a salary cap, the National Football League (NFL), National Basketball Association (NBA), and National Hockey League (NHL). It concludes with some analysis of the impact of salary caps and other mechanisms on controlling player costs.

The Limits of Work Humanization

Utopian Socialists at the turn of the eighteenth century and extends throughout the broad range of socialist ideologies: Anarchism, Syndicalism, Marxism, Leninism, Guild Socialism, Social Democracy and Maoism. Today, labor unions and industrialists in capitalist countries are beginning to talk about &dquo;humanizing work,&dquo; &dquo;job enrichment&dquo; and worker participation in decisionmaking. Workers’ control over handicraft production in America’s utopian societies died with the demise of these societies which found themselves in a hos-

Waiting for change: Adjustment and reform in Cuba

Abstract Buffeted by the collapse of trading relations with the former socialist bloc and the continuing US embargo, Cuba has attempted to adjust to external crisis via tighter rationing to curtail demand and traditional planning and sectoral strategies to expand the supply of tradables. This overall program has failed and Cuba has recently begun timid steps toward a more market-oriented approach. We argue that the centerpiece of a new strategy should be a rapid privatization which can be designed to absorb the monetary overhang, widely distribute assets and control, and protect the social safety net that has characterized the Cuban economy.

Patterns of Cuban development: The first twenty-five years

Abstract This paper interprets the post-1959 evolution of Cuban economic policymaking and performance as a function of the shifting and interacting domestic and foreign sources of surplus accumulation. Policy choices previously seen as strictly subjective, such as the use of moral incentives in the late 1960s, are attributed objective components. The tensions between decentralization and centralization, market and plan, private and public, agriculture and industry, efficiency and equity are discussed in relation to domestic surplus generation. The role of Soviet aid, commodity prices, trading patterns and debt repayment are treated in analyzing foreign influences on surplus generation.