Sample Essay On Economics: State and public funding of professional stadiums in Canada

1. Introduction

Sports are acutely stitched into the fabric of Canada’s culture and they tend to help build and define individual, group and national identity of the country. Devotion and sports passion haves in the Canadian society. The popularity of sports among Canadian spectators cannot be underestimated. For example, in the November of 2003 when the temperature was a cruel minus nineteen degree centigrade, over fifty thousand spectators sat on an outdoor rink to watch the Heritage Hockey games at Edmonton’s commonwealth stadium.

When sports have been such a vital part of the Canadian society, debates and controversy about them have been inexorable.  One of the most exciting debates that have sparked in recent has been over state and local financing of stadiums inCanada. Today, when Ottawa is looking to build a new stadium with an estimated cost of 185 million dollars (Sindark, 2009), the same debate has been kindled; as to whether the high value stadium should be financed by the state or should the financing, design, construction, renovation and maintenance of stadiums receive private investment only?

2. Is there an economic rationale for State and public investment in stadiums inCanada?

2.1 Benefits of public subsidizing stadiums in Canada

The major argument that is put forward to support public funding of sports stadiums in Canada is that Stadiums provide spillover benefits that are similar to schools or museums. Spillover benefits of building stadiums are external benefits to third parties and they result when the marginal private costs of a new stadium exceed the marginal social cost of building a stadium.  (See figure 1). Stadiums tend to provide positive externalities to third parties such as increased civic pride and public morale. A country’s image enhances if it hosts a prestigious sporting event such as the Super Bowl. The existence of professional sports franchises are the pride of a country and sports contests are a part of its civil culture. Stadiums also bring businesses to the country leading to large scale employment in other sectors such as that of food and beverage, souvenir vendors, hotel, restaurant and tourism. (Perry, 2001)

Now, whether stadiums are poor government investments or not is a different concern but there is considerable justification for state subsidizing of stadiums in Canada. When sports are a part of the civic culture ofCanadaand they play a role in establishing the country’s national identity and pride, government funding in the sports arena is justified. 

Further sports contests being part of the civic culture of Canada increase the willingness of the Canadian citizens to fund this kind of activity just like they would subsidize other activities such as parks and hospitals.  

Furthermore, building stadiums spurs Canada’s economic growth. New stadiums encourage new spending and create new jobs. First, building a sporting facility such as a stadium creates jobs for construction companies. Second, a huge number of spectators turn up to watch the sporting events at the facility and lots of people work for the sports teams generating new spending in the community, increasing employment . Third, sporting events attract tourists and businesses to the country hosting the prestigious events which further increases local spending and employment.  There will be a multiplied increase inCanada’s national income. Why there will be a multiplied increase in the national income can be seen through the multiplier effect. All the spending injected into the Canadian economy creates a multiplier effect as increased local incomes causes new spending and increases jobs. (Gessing, 2001) (See Figure 2)

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