Rodríguez, P. & Baños, J. (2013). Economic impact analysis of the Davis Cup semi-final Spain vs United States. Journal of Sports Economics & Management, 3(1), 47-63. ECONOMIC IMPACT ANALYSIS OF THE DAVIS CUP SEMI-FINAL SPAIN vs UNITED STATES Análisis del impacto económico de la semifinal de la Copa Davis entre España y Estados Unidos Plácido Rodríguez Guerrero, José Francisco Baños Pino Department of Economics, Universidad de Oviedo (Spain) Abstract: The organization of any sporting event of some magnitude usually has a significant impact on the region where it is celebrated. To calculate the economic impact of a sport event there are different economics tools, Input- Output (I-O) model is the method used in this study. This paper looks at the economic impact for the Autonomous Community of Asturias due to the celebration of the Davis Cup Semi-final in Gijon, in September 2012, using last Input-Output tables of Asturias (2005). We want to calculate the economic impact of this event in terms of gross value added and employment. We use information that comes from data provided by the organization of the event and a survey carried out by the hotels in the city during the course of the competition. The aim of the study is to control if the public money becomes exhausted correctly. The economic results are positive principally for the expenditure of non-residents; on the other hand the impact on employment was not very relevant except in the Hotel industry sector. Keywords: Impact Analysis, Davis Cup, Input-Output, Multipliers, Gross value added, Employment Resumen: La organización de cualquier evento deportivo de cierta magnitud por lo general tiene un impacto significativo en la región donde se celebra. Para calcular el impacto económico de un evento deportivo existen diferentes herramientas económicas, el modelo Input-output (I-O) es el método utilizado en este estudio. Este trabajo analiza el impacto económico sobre Asturias, debido a la celebración de la semifinal de la Copa Davis en Gijón, en septiembre de 2012, mediante el uso de últimas tablas Input-Output de Asturias (2005). Se calcula el impacto económico de este evento en términos de valor añadido y empleo. Utilizamos la información que proviene de los datos facilitados por la organización del evento y de una encuesta llevada a cabo por los hoteles de la ciudad durante el transcurso de la competición. El objetivo del estudio es controlar si el dinero público se gasta correctamente. Los resultados económicos son positivos , principalmente para el gasto de los no residentes, por otro lado el impacto sobre el empleo no es muy relevante, salvo en el sector de la Hostelería. Palabras Clave: Análisis de Impacto, Copa Davis, Input-Output, Multiplicadores, valor añadido, Empleo Información de contacto: Plácido Rodríguez Guerrero [email protected] 47 Rodríguez, P. & Baños, J. (2013). Journal of Sports Economics & Management, 3(1), 47-63. 1. Introduction This paper analyses the economic impact derived from holding in Gijon (Asturias) the Davis Cup Semi-final between Spain and the United States, from 14 to 16 September 2012. It is well known that sports tournaments or exhibitions are part of what the literature calls special events, which are defined as those "that occur once or infrequently and, for a limited duration, provide consumers opportunities social and leisure activities beyond their everyday experiences" (Jago and Shaw, 1998). These special events and more specifically sports have grown in number and size in recent years in most developed countries. In the case of Spain, we should highlight the organization of the America's Cup and the Formula 1 Grand Prix, both in Valencia, the celebration in Spain of the Handball World Championships in 2013 or the World Basketball Championships in 2014. These events have a global character, but the economic impact is in the city or in the province where they are held. The same applies to other events, such as marathons in Barcelona or Madrid and other minor sporting events. A priori, from an economic point of view, it may be interesting for a small province (or city) to host a competition of this kind, since the tourists special events such as tennis, have on average higher costs than other tourist activities (Getz, 1994). In order to analyse the economic impact of the celebration in Gijon the Davis Cup Semi-final, this paper proceeds as follows: Section 2 analyses and assesses some economic impact models; Section 3 presents the results generated by the tourism spending; spending championship organization and its impact on the Asturian economy is analysed in Section 4; Section 5 presents the overall results of gross value added and employment; finishing with the conclusions. 2. Economic models of impact The organization of any sporting event of some magnitude usually has a significant impact on the region where it is celebrated. The influx of competitors and fans from outside the region, which made spending on accommodation, food and other goods and services, involves an injection of income into the local economy, with the ability to create jobs and generate wealth. In addition, the expenses required for the implementation of the sporting event also involve, usually, more production and local employment. Economic theory provides tools to accurately study the impact of holding a sporting event such as a Davis Cup tie. The theoretical foundations of the economic impact analysis of sports events can be studied in various publications among which are: the pioneering work of Burns, Hatch and Mules (1986) to study the Formula 1 Grand Prix in Adelaide; analysis of Getz (1987) Greig and McQuaid (2003), Preuss (2004), Blake (2005) 48 Rodríguez, P. & Baños, J. (2013). Journal of Sports Economics & Management, 3(1), 47-63. and Dwyer et al. (2005 and 2010), cited in the references; and the recent handbook on the subject published in 2012 (Maennig and Zimbalist). Most of the economic literature that evaluates the economic impact of a sporting event uses two types of economic models: the model Input-Output (I-O) and computable general equilibrium model (CGE). These models are not the only instruments we have in order to assess the economic impact; it can also do a comprehensive approach through the Cost-Benefit Analysis (CBA) and the Contingent Valuation Method (CVM). The general approach of estimating the additional income generated by the event uses an Input-Output model to estimate the direct, indirect and induced effects on the economy. I-O model is the method used in this study. The I-O model is a useful tool to quantify structural interdependencies of an economy through matrices representing all flows of goods and services (input-output), expressed in detail monetary values and classified into product groups or industries. For any given level of expenditure of an event, the increase in value added and employment in the region will vary depending on which industries are those that receive direct spending. Specifically, the expenditure attributable to the event by organizers and visitors stimulates economic activity, boosting business, which impacts on employment and income of the families of the host community. This impact affects every sector with a different intensity. Consequently, the process of estimating the economic impact is performed by a model that identifies the relationships between the different sectors of the local economy. In short, one could say that holding a sporting event as a Davis Cup Semi-final, is a direct economic impact arising from the initial injection of income, which in turn generates indirect effects of production and induced consumption on the local economy. Direct impacts reflect the organization spending in the host city, as well as the one done by visitors in the different sectors of the economy. Therefore, the first step in economic impact studies is to identify direct monetary flows within the local economy that are explicitly attributed to the organization of the event. Indirect effects arise as companies that sell their products and services to the organizers and visitors buy inputs from other local businesses. These other businesses purchase inputs from other firms and so on. Induced consumption impacts arise when employees of businesses that receive direct and indirect impacts of the event, spend their wages on goods and services in the local area, and when the owners of the businesses, which increased sales due to the event, spend their profits in the region. The I-O model presents a number of important advantages as it provides a complete picture of an economy focusing on the inter-sectorial and allows calculating the direct, indirect and induced disaggregating by industry (Fletcher, 1989; Baños & Rodríguez, 2013). 49 Rodríguez, P. & Baños, J. (2013). Journal of Sports Economics & Management, 3(1), 47-63. However, it is well known that this approach is also subject to a number of limitations. First, it must be accepted that the restrictive assumptions used to simplify the behaviour of the economy are considered as functions of production and demand for fixed proportions (Leontief technology) or technical coefficients are constant. That is, we would be assuming that prices of inputs (and outputs) are not changed in relative terms, when in reality this is not necessarily so. Prices can vary with an increase in tourism or investments organizing the event. The implications arising from not allowing the replacement of the factors which have been expensive in time with those that are relatively cheaper will be more important, of course, the greater the difference between the price structure for the date of preparation of the input-output tables and the period in which we analyse the impact of the event. Secondly, the I-O approach has other weaknesses, such as the assumption of the free availability of factors.