Sports Industry: The Economic Spillover of LeBron James

TPOH

America loves its sports teams. There’s nothing like a cross-division rivalry to get people worked up and trash talking. Teams bring a great deal of pride to cities, and that’s why the years never blunt the hurt of a team’s move, whether it be the 1984 bolt by the Colts from Baltimore to Indianapolis or the 2020 planned move of the Raiders from Oakland to Las Vegas.

Cross-country movements of teams remain psychologically, if not economically, important to cities.

But individual athletes also have their impacts on a town. Some of it is cultural or behavioral. Star athletes can be propped up as hometown heroes, or if they misbehave, they can be shamed out of a city.

Take LeBron James, for instance. Practically a household name, James won the NBA’s MVP award four times. He won three NBA championships, and was part of two victorious US teams at the Olympics. He is a showman and a hard charger, and is welcome wherever he wants to play.

James’ move from his hometown Cleveland Cavaliers to the Miami Heat in 2010 felt like betrayal to the locals who watched him rise from a Northeastern Ohio upstart to an international superstar. Likewise, his move back to Cleveland in 2014 was treated like the prodigal son had returned home.

Now, a recent economic study concludes that James’ influence goes beyond pride. His popularity makes him a draw, but his presence has a significant economic impact on the communities where he plays.

We find that Mr. James has a statistically and economically significant positive effect on both the number of restaurants and other eating and drinking establishments near the stadium where he is based, and on aggregate employment at those establishments. Specifically, his presence increases the number of such establishments within one mile of the stadium by about 13 percent, and employment by about 23.5 percent. These effects are very local, in that they decay rapidly as one moves farther from the stadium.

Mapping out concentric circles to measure James’ impact around the sports facilities where he played, the study’s authors measured growth using employment and establishment data from Harvard’s Center for Geographic Analysis. They crunched the numbers to calculate the increase in food and beverage establishments and the number of employees in these industries within 10 miles of the Cleveland and Miami basketball stadiums.

The economists then ran a couple regression analyses and found that James’ presence increased the number of restaurants up to about seven miles.

The data show a downward trend in the number of restaurants in Cleveland between 2010 and 2014 that coincides with an upward trend in Miami. After Mr. James returned to the Cavaliers, the number of restaurants near the Quicken Loans Arena in Cleveland spiked, while the number of restaurants within a mile of the American Airlines Arena started to slide.

They also found a positive correlation between the number of regular-season wins won by the Cavaliers and the Heat and the number of restaurants located within one mile of the corresponding stadium.

But when they separated out the cities using a different formula, they found that James’ impact was greater in Cleveland than in Miami. So what can they conclude?

Two potential explanations come to mind. Perhaps Mr. James is particularly beloved in his native Ohio. Or maybe ‘superstar amenities’ are substitutes, not complements, and Miami has plenty of them even without Mr. James, generating fiercer competition and an attenuated impact of any specific superstar.

In other words, a town that has more to offer to its residents and visitors, an advantage Miami has over Cleveland, may feel less impact from the arrival or departure of a superstar athlete.

Whether or not you can draw a conclusion from this standalone study, it’s fun to consider. And more importantly, it suggests that it wouldn’t hurt to take care of our neighbors who make good. Their success reverberates like a stone skipping across the water.

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