The Benefits of College Athletic Success
Unexpected regular season football victories by NCAA Division I-A schools increase alumni athletic donations and applications.
In The Benefits of College Athletic Success: an Application of the Propensity Score Design with Instrumental Variables (NBER Working Paper No. 18196), Michael Anderson finds that unexpected regular season football victories by NCAA Division I-A schools increase alumni athletic donations by $134,000. These victories also increase applications by 1 percent, and they improve a college's 25th percentile SAT score by 1.8 points.
Anderson uses data on bookmaker spreads to estimate the probability of winning each football game, and thus to identify unexpected success. He then estimates the effect of unexpected success on donations and applications. He suggests that his observed effects likely operate through one of two channels. First, a team that plays well may be more enjoyable to watch, and if alumni and prospective students spend more time watching a college's team, they may feel more connected to the school. Second, fans and alumni may enjoy winning itself.
Anderson notes that a simultaneous investment of $1 million in every one of these teams probably would generate smaller effects on donations and applications than the surprise victories he studies, because team won/loss records are a zero sum game and improving the level of overall play would not create any more wins for a given team.
About 8 percent of the teams in Anderson's sample improve their season wins by five games over a one-year period. Improvements of that magnitude increase alumni athletic donations by $682,000 (28 percent), applications by 677 (5 percent), and 25th percentile SAT scores by 9 points (1 percent).
--Linda GormanThe Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.