Econometric Analysis of Fiscal Policy on Sport and Recreation

Background/Purpose: In almost every country, the proportion of people aged over 60 years was growing faster than any other age group (WHO, 2014). Consequently, it challenges society to adapt and fulfill the needs of senior citizens. There was no doubt that physical activity could enhance healthy ageing. Public provision of sport and recreation, therefore, became a collective needs and public interests in the society. To develop a quality lifestyle for active ageing, the government has the obligation to allocate sufficient resources on physical activity and health promotion. Thus, the purpose of this study was to identify the relationship between public expenditure on sport and recreation and tax revenue by using econometric modeling. 

Method: Data from government agencies of Hong Kong between the periods of 2001 to 2013 were used for this study. Time Series Analysis was used to identify the determinants of public expenditure on sport and recreation. Unit Root Test was used to evaluate the stationarity of the data collected. Econometric modeling was used to identify the relationship among government revenue and public expenditure on sport and recreation.

Analysis/Results: Results indicated that tax revenue was the driving force of the public expenditure on sport and recreation and had a direct relationship. However, it was noticed that the proportion of spending on sport and recreation toward the total government expenditure has continued to drop from 1.1% to 0.9% since 2001. The government expenditure mainly financed by tax levy. During 2001-2013, the compound annual growth rate (CAGR) of the tax revenue and public spending on sport and recreation were 7.04% and 2.71% respectively.

Conclusions: Many countries have already begun experiencing an ageing population as people were living longer than previous generations. However, adding years to lives did not mean people were stronger and healthier. Public provision of physical activity and leisure opportunities was not just entertainment goods, but a means to enhance quality of life and health status of citizens (especially for older adults). Public and community recreation could be viewed as public goods and should be financed by public funding. Unfortunately, results from this study indicated that recent resources allocation regime did not favor the sport and leisure field. In order to promote physical and psychological well-being of older adults as well as preserving their independent and cognitive functioning, government should provide adequate resources in sport and recreation along with a well-developed policy to better serve the ageing population.