Public Subsidies to Stadiums: Do the Costs Outweigh the Benefits?

Abstract

This article reexamines the costs and benefits to cities of publicly subsidized stadiums by measuring the welfare gain of a stadium. Previous research has shown that the economic impact of a stadium on a local economy is insignificant compared to the costs of the stadium. However, the literature has ignored the welfare gain generated by a stadium. The annual consumer surplus generated by a stadium is calculated from a simple demand curve for baseball games using 1972 to 1991 data on ticket prices and attendance. Estimates of the consumer surplus are in the range of $2.2 million to $54.1 million per season. Further, the annual net benefit of a stadium exclusive of any induced economic activity ranges from minus $19.1 million to $32.8 million.