Economics of Sport Discussed at HSE April Academic Conference

Economics of sports was one of the topics featured at the recent April Academic Conference. A section led by HSE Deputy Vice Rector Dmitry Dagaev included sessions dedicated to financial and organizational regulation, competitive balance, and determinants of success in sport. Several international scholars participated in the event. Prof. Dennis Coates, Dr. Tim Pawlowski, and Carlos Gómez González have talked to HSE News about their research interests and the importance of sports in modern global economy.

Dennis Coates, Professor of Economics at University of Maryland and  Leading Research Fellow of Intangible-driven Economy Laboratory at HSE Perm

Sports as a research area

In 1995, when Professor Coates moved to Baltimore, an American football team left the city of Cleveland and moved to Baltimore.  The news was full of stories about how many jobs would be created with the arrival of the football team in Baltimore.  The news also reported gains in income for residents of Baltimore and increases in tax collections.  ‘Because American football teams play only 8 to 12 home games I did not think it possible that the presence of the team could generate the effects that supporters of the club were claiming.  Together with a colleague at the time I proceeded to estimate the impact of sports franchises and stadium and arena construction on local economies.  After several papers looking at that issue in numerous ways I branched out into other areas of the business and economics of sports’.

Since 2014 Professor Coates has been a member of the International Laboratory in Intangible Driven economy at HSE in Perm.  ‘I will continue working in that capacity, he says. And, through events like the April conference, I hope and expect that my work will extend to collaboration with other researchers in HSE.  Perhaps the most exciting thing for me is the breadth of issues that Russian researchers are involved in and the support within HSE for pursuing those issues. While in Moscow, several of us in the sports sessions took the opportunity to attend the semi-final of the football cup in Khimki, between CSKA and Krasnodar.  That was a fun and interesting experience.'

Sports in national economics

Sports is big business in many countries of the world.  Russia is no exception. There is a distinction between fitness and sport; fitness is different from sport because of the benefits to physical and mental health from fitness activities.  Spectator sports probably have little of those.  Nonetheless, perhaps the largest impact of sports and fitness is on the quality of life of citizens.  Sports can bring disparate people together when they have nothing in common.  For example, the most influential politician or wealthiest businessman may have only their love of Spartak or Zenit in common with a factory worker or cab driver.  As a purely monetary matter, sport and fitness are not large contributors to a national economy.  While the salaries of star players are enormous compared to those of the typical worker, there are few employees of sport clubs.  Fitness activities would be much larger than sport, because fitness includes many activities with large numbers of participants and many employees, especially if one includes sports equipment and sports apparel within the fitness category.  But relative to grocery stores, oil companies, automobile companies, etc., both sport and fitness are tiny parts of the economy.

Sports can bring disparate people together when they have nothing in common.  For example, the most influential politician or wealthiest businessman may have only their love of Spartak or Zenit in common with a factory worker or cab driver

‘For me, as someone who comes to sports economics largely from the angle of effective use of resources, the economics of sport is really a great laboratory for studying broader economic questions.  For example, if one wants to study the influence of incentives on worker effort, it is difficult or even impossible to do in a traditional industry, say manufacturing.  It is nearly impossible generally speaking to know the production of a specific worker in a factory.  In sports however, there are numerous statistics gathered about the efforts of individual players.  For example, in football one knows the goals, assists, tackles, penalties and fouls of the players.  New work uses measures of distance run by a player during a match as a measure of effort.  And with information on player pay and the bonuses in contracts it is possible to examine the influence of these incentives on player effort.  This same approach can be extended to the influence of incentives on team decisions, fan decisions, and so on.’

Professor Tim Pawlowski, Chair in Sport Economics, Sport Management and Media Research at the University of Tübingen

He studied Economics at the University of Cologne and Sport Science at the German Sport University and was fascinated by working in the intersection of both disciplines. This is the reason why he did his PhD in Sport Economics in 2009. ‘Sport Economics is not just applying economic theories and methods to the area of sports. Rather it is about adjusting standard theories and methods and implementing new approaches to consider the peculiarities of sports. My empirical work is based on both, secondary and primary data.’

There seems to be a generally increasing interest by Russian colleagues in Sport Economics. This might be partly driven by recent and upcoming major sport events such as the 2014 Olympic Winter Games in Sotchi or the 2018 FIFA World Cup in Russia

As Prof Pawlowki says, sport economics research basically started several decades ago with the seminal works by Simon Rottenberg on ‘The Baseball Players’ Labor Market’ (Journal of Political Economy, 1956) and Walter Neale on ‘The Peculiar Economics of Professional Sports’ (Quarterly Journal of Economics, 1964). Since then the discipline has rapidly evolved and considers nowadays also topics beyond professional sports, such as labour market and health effects of sports participation or the effectiveness and efficiency of sports related public expenditures.

‘Broadly speaking, there are two lines of research, i.e. papers using sports data to test general economic theories and papers that make use of (modified) economic principles and methods to inform decision makers in sports and (sports) policy. There seems to be a generally increasing interest by Russian colleagues in Sport Economics. This might be partly driven by recent and upcoming major sport events such as the 2014 Olympic Winter Games in Sotchi or the 2018 FIFA World Cup in Russia. Empirical studies conducted in some European countries like Germany suggest that around two to three percent of the gross domestic product can be attributed to sports. However, I am not aware of related figures from Russia’.

Carlos Gómez González, University of Castilla-La Mancha

After an international exchange at the University of North Carolina at Greensboro (USA), Prof González decided that he wanted Sports Economics to be the focus of his academic career. He met professors Leonor Gallardo and Julio del Corral in Spain and started to work in the IGOID Research Group at the University of Castilla-La Mancha.

According to Prof González, sport and fitness are two sectors of the leisure industry which have an important influence on the economy of countries. For instance, the European Commission reports that the sport sector contributes with more than 2% to the European Union global gross domestic product (GDP). These sectors have experienced a fast growth during recent years because people not only watch more sport on TV or go to the stadiums, but they also practice more physical activity (e.g., jogging, swimming, cycling, fitness group activities).

In the case of the European soccer leagues, female team managers perform significantly better when having more specialized experience and in the North American basketball case, they manage to perform as good as male managers with weaker teams

Apart from the important contribution of sports to the GDP of domestic economies, this sector is growing so fast that the impact on global economics is greater every year. To understand the behavior of the population in general and sports fans in particular is key to analyze this global effect. Factors determining sports demand, efficiency of sports clubs and organizations, physical activity programs as tools to reduce costs in the health care system are just some examples of burning issues in the field.

‘The discussion at the April conference was really good. We had a great opportunity to discuss our findings on female and male coaching with some of the most important sports economists at the moment. This is a challenging answer that needs more empirical effort to be fully answered. We can argue that gender per se is not a definitive factor in coaching. However, we did find that female team managers are not underperforming when compared to their male counterparts in this particular scenario. Besides, in the case of the European soccer leagues, female team managers perform significantly better when having more specialized experience and in the North American basketball case, they manage to perform as good as male managers with weaker teams. Game is still on! Moreover, I had the chance to meet professors and other professionals working in similar ideas and exchange knowledge and opinions with them. Finally, I could also meet the fantastic research team of the International Laboratory of Intangible-driven Economy, which is developing so fast and performing very well.’