Assessing the economic justification for government involvement in sports facilities and events in New Zealand : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Economics at Massey University, Manawatu campus, New Zealand
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Date
2010
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Massey University
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Abstract
The major objective of this research is to critically examine the justification for
government involvement in the construction of sports facilities and the hosting of major
sport events in a New Zealand context. There has been an increased focus on the
appropriateness of the involvement of government (at all levels) in such projects. Almost
all sports‐related projects, including facility construction projects or the hosting of events,
have been justified by ex‐ante economic impact studies that predict the creation of jobs
and income generation as outcomes that accrue to host economies.
The research within this thesis seeks to answer several questions that contribute to the
overall research objective. Firstly, a case study example of Wellington’s Westpac Stadium
is analysed with a view to examining whether local and regional government involvement
in the construction of the stadium was justified on economic impact grounds. The research
then focuses on evaluating the ex‐post economic impacts of sports projects in a panel
context across New Zealand. Realised outcomes of facility construction and the hosting of
internationally oriented events are estimated through the development of models for
territorial local authority (TLA) sector‐specific employment and real GDP.
The research then considers a potential explanation for why governments continue to
subsidise events and facilities, why ex‐ante projections of economic impacts often fail to
materialise, and why some ex‐post analyses have found negative realised outcomes. A
game theory model is developed in which cities compete to host an event, with a subsidy
as part of the hosting arrangement. The final analytical contribution of this research
involves the estimation of consumer surplus benefits from a demand model for
representative rugby in Wanganui. The consumer surplus benefits are then compared to
the cost of local council involvement in the upgrade of the playing facility to evaluate
whether the council’s involvement was economically justified.
Findings of the research suggest that the economic impact argument for government
involvement in the construction of sports facilities and the hosting of internationally
oriented events is generally not justified, and that the measurement of benefits are needed
to evaluate the desirability of government intervention in such projects.
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Keywords
Westpac Stadium, Sports facilities construction, Sports event subsidisation, Wanganui rugby, Sport and economics