0 The data attached are information from the 9 cities (labelled A through I), ea
ID: 1120907 • Letter: 0
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The data attached are information from the 9 cities (labelled A through I), each with a stadium/arena that shares a professional hockey and basketball team. During the study period, 2001-2005, 5 of the 9 opened new stadiums. We are interested in whether such a stadium boosts salestax revenue for a city (a common justification for public financing of stadiums).
The variables in the data are arranged by city-year. They are:
Y-variable: Per capita tax revenue per city-year
W-variables (other covariates): Unemployment Rate and City metro area population in millions
X-variable of interest: Indicator (0 or 1) of whether a new stadium was opened within past 5 years
1. Estimate the simple regression of Y on X. That is, estimate the effect of opening a new stadium on sales tax revenue. Display and explain the result.
2. What was wrong or missing in your estimation of 1 that makes it a bias or unreliable estimate of the effect of stadiums on tax revenue?
3. Perform a proper difference-in-difference analysis of the effect of stadium openings.
a. Write out your estimation equation, making clear what variables and fixed effects are included.
b. Display the results of this estimation.
c. Explain the results of this estimation. Be sure to indicate the interpretation of the key coefficients and whether they are significant.
4. Does it seem like using taxpayer funds for a new stadium is a good idea? What if the city used $200 million in tax revenue to fund the arena? Does the return of a stadium seem to justify the costs?
City Year Tax revenue (per person) Unemp Pop (in millions) New Stadium A 2001 185 4.2 2.15 0 A 2002 186 4.1 2.18 0 A 2003 188 3.9 2.19 0 A 2004 194 4 2.21 0 A 2005 198 4 2.22 0 B 2002 165 5.8 1.8 1 B 2003 164 5.7 1.78 1 B 2004 166 5.9 1.78 1 B 2005 175 6 1.77 1 B 2001 157 5.8 1.81 0 C 2004 161 5.5 3.57 1 C 2005 165 5.4 3.58 1 C 2001 155 5.4 3.55 0 C 2002 156 5.4 3.56 0 C 2003 158 5.3 3.55 0 D 2001 192 4.1 7.24 0 D 2002 188 3.9 7.32 0 D 2003 201 3.8 7.45 0 D 2004 205 3.7 7.51 0 D 2005 207 3.9 7.66 0 E 2001 177 4.2 8.81 0 E 2002 179 4.1 8.88 0 E 2003 185 3.9 9.01 0 E 2004 186 4 9.05 0 E 2005 188 4.1 9.07 0 F 2004 161 4.2 6.42 1 F 2005 165 4 6.41 1 F 2001 144 4.1 6.45 0 F 2002 147 4.2 6.44 0 F 2003 150 4.3 6.43 0 G 2003 185 5.4 3.79 1 G 2004 190 5.3 3.78 1 G 2005 191 5.2 3.76 1 G 2001 170 5.5 3.81 0 G 2002 180 5.6 3.8 0 H 2001 217 5.5 4.98 0 H 2002 220 5.6 5.01 0 H 2003 225 5.6 5.05 0 H 2004 227 5.7 5.1 0 H 2005 235 5.6 5.12 0 I 2004 167 4.7 1.52 1 I 2005 170 4.5 1.51 1 I 2001 161 4.7 1.55 0 I 2002 162 4.5 1.54 0 I 2003 163 4.8 1.520
Explanation / Answer
1. Public Money for Private Gain- Providing public subsidies for private stadiums in corporate welfare plain and simple. Public subsidies for stadiums go directly into the pockets of team owners and players by increasing profits, player salaries and raising the re-sale value of the team. According to one study, a new stadium increases team profits by an average of $11 million annually, payroll salaries by $14 million and increases team book value by $90 million. The billionaire team owners and the players profit, but the taxpayer doesn't see a dime.
2. Negligible Economic Benefits. Contrary to the claims of stadium boosters, the wide body of economic research shows that new stadiums have little (and even negative) impact on the local economy. Stadiums don't create new wealth; they simply redistribute existing entertainment dollars from one form of entertainment to another. People spend more on sporting events but spend less on movies, restaurants and other local entertainment.
3. Costs Outweigh the Benefits-A study by the Kansas City Federal Reserve Bank found that a typical baseball or football stadium costs taxpayers $188 million while generating only $40 million in long-term benefits from jobs and tax revenues. The costs of a stadium outweigh the benefits by more than 4 to 1
4. Destroys jobs and drives down wages. Recent studies suggest that stadiums actually destroy more jobs than they create and reduce local income overall. Because sports teams require relatively few employees to operate, and most of they jobs are low-wage temporary positions, they cause overall employment and income in a city to decrease when they drive out other local businesses (which provide more jobs at better pay).
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