|  | Feature | No.60 October 2010 |

Sport and the Economy - Review on Impact Studies
Pedro Guedes de Carvalho
Nobody questions that sport exhibits a strong connection with the world economy or the role that sports can play within the European Union (EU) and world global policies for sustainable development and healthy life conditions. However, those connections have uneven impacts depending on a number of variables and contexts. A number of authors have been considering different approaches to determine an appropriate methodology to calculate the economic impact of different mega-sport events. Examples come from different sporting National Leagues to the World Cups or Olympic Games, either from local/regional level analysis or worldwide comparisons. Some of the trials focus on the “primary economic effects” alone and others try to extend the analysis to the intangible, indirect and induced effects of the event itself. We consider that these studies developed in a systematic way from the beginning of this century.
At the EU level, the White Paper on Sport released on 2007 includes sections on the societal role of sports, the economic dimension of sports and the organisation of sports. Since then, all European governments have increased their interest in the role that sports can play within global policies for local and sustainable development, looking for inclusion policies of several minorities and improving healthy life conditions together with health organizations in order to decrease health policy costs. While the positive primary effects described above are measured in employment, growth and raising money, these last effects could be known as the “saving money effects” while the whole country (taxpayers) will pay less for the same level of health.
Sport and physical activity are definitely connected to public health because physicians clearly accept that to alleviate several social diseases (obesity, diabetes, osteoporosis and so forth) it is more efficient to use exercise and regular physical activity as complementary prescriptions.
According to the White Paper (European Commission, 2007a):
“Sport is a dynamic and fast-growing sector with an underestimated macro-economic impact. Although sound and comparable data are generally lacking, this is confirmed by different studies and analyses of national accounts (impact on value-added and purchasing power; impact on employment), the economics of large-scale sporting events, physical inactivity costs, including for the ageing population (health care cost reduction, health promotion), and by sector specific analysis (e.g. sport and tourism as economic drivers). The further globalization, commercialization and professionalization of sport go hand in hand with increased sport sponsoring, sale of broadcasting rights and ticket sales. Sport structures and leisure facilities, especially at local level, will require innovative investment and reconfiguration to meet the evolving sport and physical activity needs of the 21st century”.
In this edition of the Journal, ICSSPE wanted to highlight some of these issues and invited prominent scholars to contribute, who had recently written on the subject. The selected articles give us a broad view on one of the main issues that needs to be highlighted under the theme of Sport and the Economy, that is, the economic impacts.
Economics of sports has been approached in several ways: either in a very critical way when impact analysis has been severely criticized in Philip K. Porter (1999); considering sports as mega events such as the Olympic Games example in Preuss (2004); or calculating the multiplied effects of an initial demand shock/investment or even looking at sports as a complete industrial organized sector with interesting impacts on labor markets, location choice and urban development as in Leeds and von Allmen (2005). However, the inexistence of disaggregated data has usually led the authors to be very cautious when it comes to drawing conclusions. In fact, the White Paper (European Commission, 2007) states that it is difficult to estimate the aggregated employment of the sector growth - one of the main impact measures in the overall economy - because different countries use different methods to classify statistical information and volunteers are not visible in official labor statistics related to sport.
Within the EU, a Working Group (WG) on "Sport and Economics" was established in September 2006 aiming to develop a common statistical definition of sport as well as a method for illustrating the economic impact of sport within the EU, most likely on the basis of national sport satellite accounts. Since then, there have been meetings held annually and reports produced between 2006 and 2009.
At the first meeting in Vienna (European Commission, 2006) objective goals were established, including the formation of a core group of EU Member States to work in cooperation with the European Commission to develop a common method and statistical approach for illustrating the economic impact of sport within the EU, which should be done in two phases:
“- a piloting phase (definition of sport at EU level for statistical purposes, creating a solid database on a national level, developing guidelines for a sport satellite account on a national level) and
- an implementation phase (regular national data collection across the EU on the main parameters for the economic aspects of sport, systematic updates of the database and calculations of the macroeconomic effects, development of a concept for a European sport satellite account)”.
In 2007, several meetings occurred. The second meeting in Brussels (European Commission, 2007a) aimed at preparing a statistical definition of sport and the WG agreed to define sport, at that stage, as:

- Statistical definition: NACE 92.6 ("sporting activities"); there was consensus that a future version of NACE should also include 36.4 ("manufacture of sports goods") in the (narrowest) statistical definition of sport.
- Narrow definition: Statistic definition + all products and services which are necessary for any sports activity.
- Broader definition: Narrow definition + all products and services which are not necessary to participate in sport but with a relation to any sports activity.

However, some concerns were expressed by WG members as to the costs involved with producing data for the different categories. The WG met again in May and September. In May (European Commission, 2007b) there was a follow-up discussion where the WG accorded several rules that should be considered in order to harmonize the NACE (Classification of Economic Activities in the European Community) classification of sport activities, which in September reached this final version:
Rule 1 - revised:
Goods and services which are part of the statistical and narrow definitions of sport are also part of the broader definition of sport. The broader definition of sport will be the focus of the Working Group “Sport & Economics”.
Rule 2 - revised:
Multipurpose infrastructure and multipurpose durable goods which are not part of the statistical definition of sport (NACE 92.6) will be excluded, e.g. roads, cars, TV sets, play stations. Dedicated infrastructure (e.g. NACE 45.23.21 / 22) will be included.
Rule 3 - revised:
To avoid double counting and to ensure comprehensiveness, correspondences will be established between the manufacturing sections and the trade/retailing sections (categories 51-52) of the table. Sections 51 and 52 are only relevant in terms of trade margins.
Rule 4 - revised:
Data will be collected on the basis of a common agreement on which NACE and CPA categories to include. However, to take account of the country-specific sport landscape, additional CPA categories may exceptionally be included over and above the basic list agreed in the Working Group “Sport & Economics”.
Rule 5 - revised.
In general, only final expenditure (incl. capital expenditure) will be taken into account, and not intermediate expenditure. Reference will be made to intermediate demand only if it constitutes sizeable input for professional sport (e.g. sport agents, as opposed to soap in a stadium). In a similar way, industrial services, where they are not sport-specific, will not be considered.
The evolution of the scheduled goals is impressive and makes us think. Only in 2007 (twelve years after the Bosman Case in 1995) did the EU reach formal agreement on which transactions, expenditures, investments and goods to consider as sport economic activities! How were economic impacts measured before?
In order to strengthen the dialogue with sport stakeholders, a representative from the
Federation of European Sporting Goods Industries (FESI) and another from the European Observatory of Sport and Employment (EOSE) was invited to attend the fifth meeting in Vienna (European Commission, 2008), where broadly the WG explained the statistical differences between the older and the new categories. Whereas in the Old NACE, only one group and one class (92.6) existed, in the New NACE, the old class of 92.61 "Operation of sports arenas and stadiums" became 93.11 “Operation of sports facilities” and the old class of 92.62 "Other Sport Activities" was split up into several new classes:
79.90 Other reservation services and related activities
85.51 Sports and recreation education
93.12 Activities of sports clubs
93.19 Other sports activities
93.29 Other amusement and recreation activities
At this fifth meeting, the WG reviewed the state of play regarding the start, or possible start, of data collection based on the agreed Vilnius Definition of sport. In light of that discussion, closer cooperation was agreed among the first "wave" of countries, in particular Austria, Germany, Netherlands and UK, in order to further focus on the technical details related to the collection of data.
As economists know, I-O tables are needed to proxy economic impacts through the use of the sector multipliers. The challenge was then how to extend an input-output table with sport-relevant subjects, while only partial information (e.g. value added and output at basic prices) was available. The method would allow the integration of the information in individual cells and ensure convergence with the rest of the table. Moreover, only a few set of countries had the available I-O tables.
Finally, at the sixth meeting in Paris, some economic activities were classified in more detail (more sections and classes). The product classification at 4-digit level equivalent to the NACE classification needed to be adapted to the new NACE. The former invited organizations (FESI and EOSE) were also present to elaborate on the additions they had proposed. The purpose of EOSE classifications was to define sport and sport-related activities that were essential to understand demand and supply concerning the sport labor market.
The main development from the meeting was to create value added first, then using coefficients to convert value added into full-time employment equivalents and finally check the compatibility with the figures provided by EOSE.
In the 2009 report ,we read that
“It was suggested to publish a "vademecum", i.e. a publication of the results of work undertaken on national Sport Satellite Accounts in those countries that were frontrunners. It would be useful to present the publication to the political level in the first half of 2010”.
To date, it appears that there is an Austrian Sport Satellite Account but no more news has been forthcoming from the WG.
Taking into account the EU situation and the existence of similar concerns in the US, the feature of this ICSSPE Journal is made up of 3 excellent articles which review and reflect upon how best to assess and measure economic impacts of sport. Swart and Bob provide an overview of the most recent big sport event – The 2010 Soccer World Cup in South Africa; Matheson reflects on the existence of economical benefits usually attributed to stadiums and mega events in local economies and finally, Preuss, Könecke and Schütte present a model for measuring club impact in a region.
Finally, we would like to acknowledge the excellent reviews of literature undertaken in all three contributing papers.
References
Leeds, Michael and von Allmen, Peter (2005) The Economics of Sports. Pearson Addison Wesley Eds., 2nd edition.
Porter, Philip K. (1999) Mega-Sports Events as Municipal Investments: A Critique of Impact Analysis. In: Sports Economics – Current Research, John Fizel, Elizabeth Gustafson and Lawrence Hadley (Eds), Praeger, London, p. 61-73.
Preuss, Holgar (2004) The Economics of Staging the Olympics – a Comparison of the Games 1972 – 2008. Edward Elgar Ed., USA.
European Commission, Sport Unit (2006) 1st Meeting of the EU Working Group "Sport & Economics" - Meeting Report. Vienna - Haus des Sports, 27-28 September.
European Commission, Sport Unit (2007a) 2nd Meeting of the EU Working Group "Sport & Economics" - Meeting Report. Brussels - Tour Madou, 11 January.
European Commission, Sport Unit (2007b) 3rd Meeting of the EU Working Group "Sport & Economics" - Meeting Report. Brussels - Tour Madou, 23 May.
European Commission, Sport Unit (2007c) 4th Meeting of the EU Working Group "Sport & Economics" - Meeting Report. Vilnius - Lithuania, 12-13 October.
European Commission, Sport Unit (2008) 5th Meeting of the EU Working Group "Sport & Economics" - Meeting Report. Vienna - Austrian Federal Chancellery – sport section, 15-16 May.
European Commission, Sport Unit (2009) 6th Meeting of the EU Working Group "Sport & Economics" - Meeting Report. Paris - French Ministry for Health and Sport, 2-3 February.
Contact
Prof. Dr. Pedro Ferreira Guedes de Carvalho
University of Beira Interior
Sport Science Department
Covilha, Portugal
Email: pguedes@ubi.pt

http://www.icsspe.org/