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The economic effects of minor league baseball: A comprehensive assessment using econometric analysis and a hedonic pricing model

Nola C Agha, University of Massachusetts - Amherst

Abstract

Advocates of public stadium subsidies claim professional sports teams produce positive production and consumption externalities in a local economy that should manifest themselves through pecuniary increases in incomes, jobs, and taxes or non-pecuniary gains in civic pride and community spirit. Government expenditures may be efficient if either effect is larger than the public sector contribution.^ A minor league stadium building boom provides an interesting context in which to conduct economic policy research. Based on the unsupported claims of major league teams, minor league baseball team owners also maintain ex ante that new ballparks will increase employment, tax revenues, and other private economic development. Yet, no research has substantiated or refuted these assertions at the minor league level.^ This dissertation performed two analyses to remedy this gap in the literature. The first measures pecuniary gains using a dynamic panel data model and finds that AAA teams, A+ teams, AA stadiums, and rookie stadiums are all associated with significant gains in local per capita income. The presence of positive effects is strikingly different from decades of non-positive results at the major league level.^ The second analysis measures non-pecuniary benefits via a hedonic rent equation to determine whether a team is a valuable amenity that increases local quality of life. Affiliated teams are associated with significant increases in rents whereas independent teams are associated with significant decreases in rent.^ Collectively, the pecuniary and non-pecuniary benefits derived from minor league baseball are in excess of the stadium subsidy in markets with AAA teams and rookie stadiums. Only cities with independent teams suffer a loss from the presence of a team. In a more conservative case, actual dollar gains in income tax revenues are sufficient to cover the stadium cost in only 25% of AAA markets and 75% of rookie markets.^ This research helps inform the current policy debate on public funding for minor league stadiums by evaluating the veracity of claims made by stadium proponents. With hundreds of millions of public dollars spent each year on minor league baseball stadiums, the economic effects of teams on communities have important policy implications.^

Subject Area

Business Administration, Sports Management|Economics, Commerce-Business

Recommended Citation

Nola C Agha, "The economic effects of minor league baseball: A comprehensive assessment using econometric analysis and a hedonic pricing model" (January 1, 2010). Doctoral Dissertations Available from Proquest. Paper AAI3409528.
http://scholarworks.umass.edu/dissertations/AAI3409528

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