College Football Games Pay For Themselves Case Study

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Working Paper Series, Paper No. 08-02 Do College Football Games Pay for Themselves? The Impact of College Football Games on Local Sales Tax Revenue Dennis CoatesH and Craig A. Depken, IIHH June 2008 Abstract This paper analyzes the net impacts of college football games on the sales tax revenues and taxable sales of four mid-sized cities in Texas. The paper addresses the question in the title, but also asks whether state policy makers might be justified in encouraging schools in their state to play one another based on the local economic impact those games will have. In general, our evidence suggests the answer to that question is no. JEL Classification Codes: L83, H27 Keywords: tourism, economic impacts, special events Department…show more content…
This means that when the football team from the University of Texas at Austin goes on the road the cities visited experience a change in their sales tax revenues. Reading across this bottom row it is clear that each of the four teams affects revenues in at least some city it visits. Model (7) is a very general specification including all of the variables included in Models (1)-(5) except for the month dummies.10 Furthermore, we include variables that indicate the host city of the visiting team. For example, when Baylor visits Texas Tech, we create an indicator variable that takes a value of one for Waco in that month. Our intent is to test whether there are meaningful changes in local sales tax revenues in the host city of a visiting team. We find that when UT visits Texas A&M local tax dollars in Austin fall by approximately $369,000, which is significantly less than the decline in tax revenues in Austin when Texas A&M visits UT. There are no statistically significant impacts on Austin tax revenues when UT visits Baylor or Texas Tech, although the parameter estimates are negative. The upper portion of Table 5 is analogous to Table 4, the bottom half of Table 5 shows the effects on the home city of the visiting team. The remainder of the city pairs carry insignificant parameter estimates except for College Station when A&M visits Baylor and Waco when Baylor visits Texas Tech. College Station sales tax revenues fall by about $60,000 and increase in Waco by about $79,000. The bottom row reports the test statistics for the null hypothesis that each school visiting a specific other school has a harmful effect on the sales tax revenues of the home city. For example, the last row under Baylor has a test statistic of 8.01 and a p-value of 0.05. These results mean that in Austin, College Station, and Lubbock, sales tax revenues are lower when UT, A&M, or Texas Tech, travel to Waco. This may be because of the relative ease of traveling to Waco from each of the other

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