A common justification for subsidizing sports arenas is that sports arenas lead to positive outcomes that citizens can enjoy by, for example, attending their local football team matches or through civic pride knowing that your favourite team is doing well. Since these benefits are not traded in the market and aren’t given a price, calculating them has been seen to be problematic (Coates and Humphreys; 2003). In this paper, a look at the studies that have highlighted the intangible benefits of sports arenas will be taken. The intangible benefits of sports arenas have been studied in the literature following three main themes:
- Sports led urban (re)development studies, that analyse what a certain sports event such as the Commonwealth games or more specifically, what the building of a sports arena has done in terms of economic development for the city or region.
- Hedonic price model studies, that try to capture the externalities arising from the construction of sports arenas on housing price values.
- Contingent valuation approach studies, that usually use surveys to collect data on the willingness to pay (WTP) for a new sports arena within the area.
A further look at the literature will be taken for sports led urban (re)development studies due to its relevance with the purpose of this study.
Sports arenas as urban catalysts
Studies in sports-led urban (re)development literature often take a descriptive style with little or no empirical work. There is a prevalent focus amongst these studies on the architecture and iconic stature of new sports arenas (Maenning & Plessis, 2009; Ahlfeldt Maenning, 2010). These authors claim that architectural attributes play an important part in the success of sports arenas. A vast majority of studies in this field do not conclude on whether sports arenas create urban redevelopment benefits large enough to justify sports arena cost. The reason for this is because the benefits of such sports arenas are hard to measure whilst the costs are not.
In a study by Austrian and Rosentraub (2002), the authors examine the implementation of sports policies in four cities, more specifically whether the vitality or centrality of a downtown area was enhanced or sustained by the introduction of a sports arena. They find positive evidence that the focus on the sports and hospitality sector did refocus some level of development activity into the downtown areas of two cities. Furthermore, sports arenas managed to create an excitement about downtown areas which created more jobs in suburban locations. In another study, Ahlfeldt and Maennig (2010), discuss the transition in international arena architecture and review the first empirical evidence of the impact of an arena at the neighbourhood scale. The results show that newly constructed arenas can be a good means of carrying out city development policies at small-scale levels. The authors conclude that at the city level, the primary aim should be an increased influx of mass tourism generated by iconic sporting arenas. Trendafilova et al. (2012), investigate the role that sport played in revitalizing Detroit, Michigan. The authors carry out interviews with an expert panel of economic development stakeholders and find that sport activities are successful when used as a tool to enhance the downtown image of Detroit by creating opportunities for entertainment.
In another US study, Cantor and Rosentraub (2012), examine the effects of the building of a new ballpark on neighbourhood economic development in San Diego. They find an increase in the number of higher income households, a larger proportion of residents fifty years and older eight years after the ballpark was constructed, an increase in the proportion of individuals who are employed in sectors associated with high education levels, and relatively stable house prices shortly after the economic downturn in 2008. The authors conclude that the ballpark district should be considered a success. Buckman and Mack (2012) study two arena development projects in Denver and Phoenix with a focus on the role of urban form the arenas are built around. A figure-ground analysis is utilised five years prior and post arena construction to show the increase or decrease in density for both projects. The authors claim that the goals for both arena construction projects were to revitalize their respective downtown areas by attracting both businesses and residents to the area. However, despite the similar socio-economic and demographic characteristics of both projects, the Denver arena project was more successful, with a bustling hub of shops, restaurants and apartment complexes. The authors conclude that the Denver arena is proof that arenas can have a positive impact on downtown communities when an arena is built in the right context.
In more recent studies, Crompton (2014) analyses the returns on investment in sports arenas from proximate structural development. The author finds that associate developments around an arena are critical ingredients at city level whilst at regional level businesses that feed off sports arenas are vital. Lastly, the author concludes that investments in sports arenas will only be effective if they are part of an integrated coherent master plan involving all parties such as city mayors, local authorities, and sports arena investment owners.
The literature in this field of study produces encouraging results for sports arenas to be used as economic regenerators of downtown areas in cities. For these areas to become a success it involves people and businesses moving towards the area where the arena is being built (Buckman & Mack, 2012; Cantor & Rosentraub, 2012).
Amenity led migration
The definition of amenities is not academically agreed upon by authors within this field of study. Amenities have been described as “anything that shifts the household willingness to locate in a particular location….and includes weather, landscape, public services, public infrastructure, crime, ambience, and so on (e.g., Roback, 1982; Gyourko Tracy, 1991; Dalenberg and Partridge, 1997; Glaeser, 2007)” (Partridge, 2010, page. 518). Whilst amenity migration has been described as “the movement of people based on the draw of natural and/or cultural amenities” (Abrams and Gosnell, 2009, page. 305) Studies in this field include several papers that are descriptive in nature and often debate which amenities should be included (Abrams and Gosnell, 2009; Storper and Scott, 2009; Greenwood 1985). There are many papers that either focus on cultural amenities (Glaeser et al., 2001; Clark et al., 2002) or natural amenities (Graves, 1980; Rappaport, 2006, Daams and Veneri, 2017). Another clear divide in the literature are those studies that focus specifically on the relationship between amenities and migration (Fabhauer and Rehdenz, 2015; Rupasingha and Goetz, 2004; Knapp and Graves, 1989) and studies that focus on amenities and regional /city development (Glaeser et al. 2001; Florida et al. 2008; Gottlieb 1994).
One of the first studies to highlight the importance of local public goods, (Tiebout, 1956) discusses the Musgrave-Samuelson analysis which formulates ideas on the efficient provision of public goods. The author makes use of this analysis to formulate his own model and come up with a solution for the level of expenditure for local public goods. In another well-cited paper, Roback (1982) discusses the role of wages and rents in allocating workers to locations with various quantities of amenities. The author develops his own theory and argues that the value of an amenity is reflected in both the wage and rent gradients. Furthermore, Roback remarks that the decomposition depends on the influence of the amenity and consumer preferences.
In a US study, Clark and Hunter (1992) integrate economic opportunities, amenities and state and local fiscal factors in determining migration using a life-cycle framework. The authors conclude that amenities, as well as labour market opportunities, are important determinants of migration. Furthermore, they find that amenities are consistently found to influence middle and older aged males to a greater extent than younger males. In an influential paper, Glaeser et al. (2001) claim that the demand for cities stems from the desire to reduce transportation costs for goods, people and ideas. Furthermore, they introduce a spatial equilibrium equation where; urban productivity premium + urban amenity premium = urban rent premium. This equation explains how wages (urban productivity premium) and the quality of life in a city (urban amenity premium) are offset by housing rents (urban rent premium) for the same city. Moreover, this equation implies that amenity premiums for municipalities may be measured by taking the difference between the rent premiums and wage premiums.
In a descriptive study undertaken by Clark et al. (2002), the authors highlight the critical role and political choices of amenities in relation to urban growth dynamics. They conclude that the decision of where to live and enjoy life can play as large if not larger role than job opportunities when deciding on where to locate. In a European study, Buch et al. (2013) investigate the determinants of the migration balance of German cities between 2000 and 2007 with a focus on the mobility of workers. They consider 71 German cities with a population of at least 100,000 inhabitants and find that both local labour market conditions and amenities matter for the residential choice of workers.
Swedish studies on migration
Värja (2014) analyses the success of football and ice hockey teams on net migration and per capita income growth. The reason why the author looks at football and ice hockey teams and not other teams from other sports is due to, she claims, that these two sports have the highest spectator attendance during matches. The author uses a dummy variable to indicate whether a football or ice hockey team is in the highest or second-highest league. Her benchmark model assumes that the explanatory variables effect net migration, the dependent variable, five years later. The author finds no positive correlation between the rate of local average income growth and successful sports teams. Moreover, results for the net migration rate are insignificant when all municipalities are considered, however a small positive effect between ice hockey teams and net migration is found when the 3 major cities, Stockholm, Göteborg and Malmö are taken out from the analysis.
Lundberg (2003) studies the factors that determined municipal net migration and average income growth during the 1980s. The author does this by including:
(1) Economic “opportunity” variables such as the share of people with a university degree, the average income level and the unemployment rate.
- Local government policy decisions such as the local income tax rate, local government expenditures and local government investments.
- National government policy variables such as intergovernmental grants and university presence
- Socio-economic and demographic structure variables such as the share of the local industrial structure, population density, population aged 0 to 15 years, population aged 65 years or above, and a dummy variable indicating whether a municipality is located in the north.
- Political composition of local council such as the share of representatives from a particular party and a qualified political majority in the local council.
Lundberg finds that initial endowments of human capital have a highly significant positive effect on net migration and a negative relationship between the unemployment rate and net migration. Furthermore, the author highlights the importance of local policy decisions on net migration and claims that local public investments have had a positive subsequent effect of net migration rates.
Nelson and Wyzan (1989) examine the importance of several fiscal and traditional market variables on Swedish local private labour demand and interjurisdictional migration. Their results show, that on a regional level, taxes negatively affect both migration and labour demand, whilst on a municipality level results are negative but more ambiguous. They find destination wages to have a significantly positive impact on municipality level migration but no effect on the regional level. The authors conclude that the disparities between the municipality and the regional results suggest that there are benefits in examining migration at the lowest level of aggregation possible. In another study, Westerlund (1997) analyses the impact of aggregate labour turnover and regional labour market conditions on county net migration using a neoclassical flexible wage model and a fixed wage model. The author finds that regional differences in employment prospects seem to be the key factor when individuals decide where to migrate. In a regional study, Aronsson et al. (2001), analyse regional income and net migration growth rates between 1970 and 1995. The explanatory variables for both dependent variables, the migration rate and growth rate of income, are measured in five year intervals. They find that indicators of future possible earnings and the initial endowment of human capital are positively related to net migration.
In another study, Lundberg (2006) uses spatial econometrics to analyse the average income growth and net migration rate for Swedish municipalities for the years 1981 to 1999. A key finding in this study is the positive correlation found between net migration rates in neighbouring municipalities, which means that net migration tends to spillover to neighbouring municipalities. To tackle this issue, the author uses a spatial lag specification to account for spatial dependence in the net migration model. In a more recent study, Malmberg et al. (2011) examine household gains and losses from migration within the Swedish urban hierarchy. They focus on whether increases in disposable income outweigh changes in housing costs when moving up the urban hierarchy to larger population-growth regions. The authors reveal that the urban hierarchy is important to consider when estimating migrant outcomes. They claim that migrants moving to larger labour markets add approximately double the amount to their nominal income when compared to migrants moving to smaller labour markets. The authors highlight the importance of taking regional housing cost disparities into account when estimating economic outcomes of domestic migration. Gärtner (2014) uses labour market, demographic, and geographic explanatory variables to explain internal county migration in Sweden from 1967 to 2003. The author uses a dynamic panel model and finds that: higher wages correlate with an increase in migration, whilst unemployment encourages people to leave to counties with increasing vacancies, and a higher share of younger people in a county attracts people to migrate to the same county.
Based on the literature review and comprehensive data collection the following hypotheses are drawn:
- Hypothesis 1: A sports arena built in municipality i at time t is positively related to net migration in year t + 5 for the same municipality.
- Hypothesis 2: A sports arena renovated in municipality i at time t is positively related to net migration in year t + 2 for the same municipality.
- Hypothesis 3: Municipalities that have a sports arena built realise positive amenity premiums five years later.
- Hypothesis 4: Municipalities that have a sports arena renovated realise positive amenity premiums two years later.
The impact of a sports arena renovated is examined in this paper even though studies on this have been few. Baade (1990) can be given as an example of an author who has investigated sports arenas renovated. The reason this paper investigates sports arenas renovated is mainly due to the Swedish setting, where sports teams entering the highest and second highest divisions in their respective sport are usually required to renovate their sports arenas to meet the arena specification requirements set by the sport association.
Furthermore, the time period for a sports arena to influence net migration might take a few years to be realised. It might take time for people to move from one place to another due to financial, family or work reasons. Both Aronsson et al. (2001) and Värja (2014) use a five year time period for their explanatory variables to influence net migration. Furthermore, Buckman and Mack (2012) look at demographic changes five years before and after stadium construction. Therefore, the impact of a sports arena built is examined five years after its construction. Since the renovation of a sports arena involves making adjustments to an existing building that has been used and known by individuals for a number of years, the effects of a sports arena renovation are likely to be realised sooner than a sports arena built. Therefore, a sports arena renovation is assumed to have an effect on net migration two years later.
Amenity premiums, which can be computed by taking the difference between rent premiums (the higher housing cost paid to live in certain areas) and wage premiums (the higher wages earned in certain areas), measures the quality of life of certain areas. This measure is introduced for the first time in a sports arena study. A sports arena, which is an amenity, may increase amenity premiums in the municipality were the arena was built, by making rent premiums increase, it is well documented in the literature that sports arenas increase housing prices in close proximity (Tu, 2005; Ahlfeldt and Maennig, 2008), and wage premiums remaining relatively unchanged.
2. Literature Review
Sports arenas as urban catalysts
4. Data, Expected Relationships, Empirical Strategy and Model
4.1.1 Dependent Variables
4.1.2 Independent Variables
4.1.3 Control Variables
4.1.4 Expected Relationships
6. Robustness Diagnostics
7. Analysis of Results
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Sport arenas in Sweden: An economic analysis