Monday, 13 June 2016

Stadium follies

If you're going to build a stadium, don't do it in hopes of boosting GDP.

Sam Richardson ably surveys the international literature before weighing up the effects of stadium construction in New Zealand.

He finds:

  • There's a short term boost to construction activity during the stadium build. He reckons Wellington had 56 more full-time-equivalent construction jobs during its build. 
  • But, there's no effect on regional GDP, even during construction, barring some effect from arena builds as compared to stadiums.
He concludes:
The results from this analysis suggest that predictions of substantial economic impacts of sports facilities have generally not materialised. Optimistic predictions need to be tempered, with particular attention paid to the existing facility landscape. There are several reasons why economic impacts fail to materialise, many of which have been mentioned in the literature review section of this paper. A short-term increase in construction sector employment for certain facility types appears to exist during construction; however the effects largely disappear post-construction. Real GDP is generally unaffected during the construction of facilities and during the post-construction period. If the intention of local government funding in such projects is to stimulate employment or GDP, projects that generally do not deliver anything more than short-term sector-specific impacts would not appear to be appropriate. 
Local policy-makers should also be mindful of other potential impacts, in particular the opportunity cost of subsidising facilities. It has been noted elsewhere in the literature that a change in employment composition resulting from subsidising facility projects could potentially bring about a worsening in economic development. If a facility project results in the creation of low-skill employment at the expense of high-skill employment, the host area may well experience a deterioration in economic development relative to other areas (Baade & Dye, 1990).
If you want to spend a pile of money throwing a party, or building a place for such things, justify it on those grounds - not on potential effects on GDP.

I wonder if Sam will turn his eye to convention centres....

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