Frank Hefner

Using Economic Models to Measure the Impact of Sports on Local Economies

Economic impact studies have been applied to a wide range of sporting and recreational events, which are increasingly viewed as an economic development tool besides their recreation benefits. Impact studies rely on the multiplier concept to determine total impacts. This paper addresses the issue of how to estimate correctly the multiplier and thus the total economic impact. The theoretical framework of impact analysis is presented. Examples of correct interpretations of data and modeling procedures are provided.

The cost-benefit model as applied to tourism development in the state of South Carolina, USA.

Local governments in the USA offer a variety of economic incentives to attract industry. In 1995, the US state of South Carolina mandated that a cost–benefit analysis be conducted before one type of incentive, the ‘fee-in-lieu of property tax’, was offered. This paper reviews and analyses the South Carolina model. The authors then develop a modified model that incorporates the features which are unique to the tourism industry. They conclude that the method described in the paper is readily transferable to any state or local government and recommend that these governments develop a similar approach using their specific costs and benefits in order to make rational decisions when offering incentives.

A Note on the Regional Impact of Military Retirees

Retirees are increasingly viewed as a growth industry. One aspect of military spending that has not been investigated is the impact on state economies of military pension payments. Using an input-output model, the total economic activity and jobs impacts of military pensions are determined for each state.

Clustering of shareholder annual meetings: a ‘new anomaly’ in stock returns

The study documents the clustering of annual general meetings (AGMs) in the months of March, April and May and shows that this clustering of AGMs in dates is positively related to average monthly stock returns in these months. The study not only documents a ‘new anomaly’ in the stock market in the recent two decades, but also provides explanations why it is so. The study shows that an economic event is behind the regularity in stock returns.

Using input-output models to measure local economic impacts

State governments are often interested in the economic impact of various policies and shocks to local economies. Typically, multipliers from an input-output model are used to determine the total effect, which includes the direct effect of the policy or shock and the so-called ripple effects. This paper presents the theoretical background and examples of applications of a regional input-output model. The theoretical background will focus on explaining hour to correctly use such models so that exaggerated effects are not claimed. Examples of how to apply a tailor made model, namely RLMS II, are discussed. The paper concludes with a discussion of the value and the potential misuses of regional impact models.

Power Laws, CEO Compensation and Inequality

We observe that CEO compensation and top incomes in the US have both been increasing rapidly over the last thirty years. We hypothesize that the trends in CEO compensation have been caused by the same economy-wide factors that have contributed to increases in income. We test this hypothesis by using ExecuComp and IRS tax data to estimate power law distributions and compare the behavior of these distributions over time. Using linear regression techniques, we estimate a power law distribution for CEO compensation and individual income. We find that the parameters of income distribution and the distribution of CEO compensation are correlated.

Research Note: An Analysis of Cruise Ship Impact on Local Hotel Demand — An Event Study in Charleston, South Carolina

This study examines cruise passenger demand for hotel accommodation in Charleston, South Carolina, prior to embarkation and after debarkation. The findings reveal that cruise passengers are significant drivers of room night demand around embarkation and debarkation. In addition, cruise passenger demand for room nights was not isolated to non-tourist districts of the greater metropolitan area, suggesting that a cruise from Charleston was coupled with a short vacation. This research is particularly important to destination managers, port authorities, municipalities and other stakeholders as they examine and negotiate the frequency, type and timing of passenger cruise service that provides the most positive benefit for the community.

Wealth Inequality and CEO Compensation

Over the past twenty years there has been a dramatic increase in both CEO pay and the wealth of the richest Americans. We examine three hypotheses regarding the relationship between wealth inequality and CEO compensation: first, that the increase in CEO income inequality helped cause increased wealth inequality; second, that increases in wealth inequality helped cause increased CEO income inequality; and third, that both types of inequality are caused by a third factor. We test these hypotheses by using ExecuComp and Forbes 400 data to estimate power law distributions and compare the behavior of these distributions over time. We find no support for any of the three hypotheses.

Power Laws and Regional Convergence

Classical economic growth theory suggests that regions will converge. Using data from 198 countries, we test the convergence hypothesis by investigating whether GDP, per capita GDP, and population follow a power law distribution. We are unable to reject the hypothesis that these variables follow a power law distribution. Our research supports the hypothesis of random growth, which is consistent with both log normal and power law distributions.

Measuring Economic Loss to a Regional Economy

This study presents an Input-Output (I-O) approach to measure the potential economic loss to a regional economy of a governmental policy. I-O models provide a relatively straight forward way to estimate the impact of public spending on a regional economy.1 A number of ready-made models exist that provide the multipliers necessary for the analysis. 2 The legal framework for this problem was a court case involving the constitutionality of procurement preferences rules. These rules give preference to bidders for state contracts based on local content and local vendor criteria. These rules consider an in-state bidder the low bidder when the bid is no higher than a specified percentage over the non-resident bidder. The economic rationale for such preferences is that by purchasing within the state, the policy results in creating more jobs than would have occurred otherwise. Further, the policy potentially produces more tax revenues for the local government. The legality of procurement preference laws has been challenged on a number of constitutional issues. In a recent case in South Carolina, the judge ruled that the preference scheme would withstand an equal protection challenge so long as the challenge drawn is rationally related to a legitimate state interest. It was argued that current state policy is to promote jobs and that this policy is a legitimate state interest. Using an I-O approach, the number of jobs that would be lost had the contract been awarded to a non-resident was determined. The earnings impact multiplier was used to determine the lost earnings and associated lost income taxes that would have resulted from an out-of-state award. These losses were compared to the added cost to the state due to the higher price paid as a result of applying the procurement percentage. *Research Economist, College of Business, Division of Research, Umverslty of South Carolina, Columbia, SC I For a comprehensive treatment of I-O models see Mfiler, Ronald and Peter Blair, (1985) Input-Output Analysts’ Foundations and ExtensLons, Englewood Chffs: Prentice-Hall 2 In this case, RIMS II, a model developed by the Bureau of Economic Analysis of the U.S Department of Commerce, was used.