Article

Multiplier Effects and Local Economic Impact

Peter Von Allmen

in The Oxford Handbook of Sports Economics

Published in print May 2012 | ISBN: 9780195387780
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780195387780.013.0018

Series: Oxford Handbooks

Multiplier Effects and Local Economic Impact

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This article investigates the multiplier model in the context of the local impact of expenditures on sports infrastructure. There are two fundamental reasons for the lack of empirical evidence of large multiplier effects: inflated estimates of the direct effects, or the “base” increase in spending; and leakage from the local economy that diminishes the multiplier. The appropriate base expenditure of hosting a team in a city is the net new spending on local incomes and businesses plus local taxes paid. The effect of tax rates on the multiplier is less ambiguous. The full-time employment benefits are small, as the ratio of part-time to full-time employment is roughly ten to one. The role of government in stimulating economic growth has always been the subject of debate in macroeconomics. Local economic impact studies argue that stadium projects and playing host to a professional sports team are legitimate engines of economic growth.

Keywords: multiplier model; sports infrastructure; large multiplier effects; taxes; employment; economic impact; economic growth

Article.  5999 words. 

Subjects: Economics ; Industry Studies ; Public Economics

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