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Wednesday, February 03, 2010

Is having a pro football franchise related to higher metropolitan area incomes?

The conventional answer to this question is probably "No." But in a paper appearing Economic Inquiry (V. 48, N. 1, January 2010, pp. 39-50), Davis and End ("A Winning Proposition: The Economic Impact of a Succesful National Football League Franchise") find that "the winning percentage of the local professional football team had a significant positive effect on real per capita income." If this holds up, this is a truly significant result in the analysis of the impact of sports on local economies.

But even based on their results, I have my doubts. First, the coefficient of having a team at all is negative and large. Just having a team is associated with a real per capita income that is about $150 lower than in comparable cities without teams. Second, before the net effect is positive, a team has to win at least 8 games. Third, the marginal effect turns negative at 11 wins, and by 14 wins the net effect is again negative. So having a team is bad. Having a medicore-to-good team is good. But having a great team is bad. I think the negative marginal effect of going from a 10-6 record to a 11-5 record is really an important result of their model, but it goes undiscussed.

Beyond that we have to deal with the causation issue. A plausible case can be made that teams in more prosperous cities have more resources available (e.g., through larger local revenue streams that are exempt from revenue sharing) and are thus able to acquire more talent.

So color me skepitcal for now.


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