Sci.Int.(Lahore),28(4),609-6122016 ISSN 1013-5316; CODEN: SINTE 8 609 July-August DOES ENTERTAINMENT INDUSTRY ENTERTAIN THE ECONOMY? EMPIRICAL EVIDENCE Mannan Hassan Khan 1 , Asim Raheem 2 , Saddam Ilyas 3 , Bilal Mehmood 4 , 1 mhk619@gmail.com , 3 economist1208@gmail.com, 2 asim_raheem92@yahoo.com,, 4 dr.bilalmehmood@gcu.edu.pk 1,2,3,4 Department of Economics, GC University, Lahore, Pakistan. ABSTRACT: The contribution of entertainment industry to boost up the economy is a new area to investigate. Films and sports (cricket) are the famous modes of entertainment all over the globe. That is why this study considers entertainment only derived from the said modes and focuses on the long run relationship between entertainment industry and economic growth. Annual frequency data for 7 countries is used via panel cointegration technique of Pooled Mean Group (PMG). Empirical inquiries provide the evidence of positive and significant long run relationship between economic growth and entertainment industry. Results also confirm causality running from films and cricket matches to economic growth. Policy makers need to incentivize the entertainment industry in order to enhance the economic growth. Key Words: Entertainment Industry, Films, Cricket Matches, Economic Growth, Cointegration. 1. INTRODUCTION “You walk into a retail store, whatever it is, and if there is a sense of entertainment and excitement and electricity, you want to be there.” Howard Schultz. For the reader’s convenience we propose a cogent argument that individual’s efficiency derived through entertainment augments the growth of a country by making it possible for the economy to produce more, with similar resources or same, with less resources. In all economies efficiency is now considered a crucial factor to compete internationally. It is perhaps the most important factor to achieve the objectives of long run growth. In this modern world, the routines of people are getting very hectic. It is getting ever important in the type of life that one is living today. One might be called human beings, but one definitely live like a robot. Without experiencing the relaxation and refreshment via entertainment, one can only work like a machine which obviously declines the efficiency. In addition, one will also fall short of our potential. Nature has drawn a very fine line between human being and machines, and one seem to cross it more often. The irony is that human beings have really been treated as machines in the modern times. Particularly, in private sector, the workload is quite high and an employee has to meet the requirements if he is to keep his name at the designated spot. Entertainment provides us the necessary vitality and fervor to go about our daily functioning and that too with gusto. The entertainment activities are to us what fuel is to vehicles. Such kind of activities can refresh our mind and can recharge it to work with dedication. Entertainment brings a lot of stability and solidity in our self and can mend our otherwise tumultuous standard routine. In the present day world, all of us are in dire need of some entertainment so that one can restore balance in our life and can have some ingenuity, innovation, spur the zest to do our tasks in a coherent, well-ordered and methodical way. In this way, one will be able to keep a good momentum towards our work and in a productive way. Without entertainment, the workload of labors can become a daunting task for them and cannot help them function effectively. It is fairly a formidable task to better the economic situations and to accelerate the economic growth with a labor force that is not operating at their potential. Given the above facts and figures, this study is of much importance as it considers the role of entertainment industry in augmenting the economic growth for seven economies of the world having cricket and films as major source of entertainment. 1.1 Objectives This paper aims to quantify the long-run relationship of entertainment industry and economic growth, which is stated under the following proposition: 1. There exists a long run causal relationship between the entertainment industry and economic growth of countries under consideration. To attain this objective, review of empirical literature is summarized in the following section. 2. LITERATURE REVIEW Meager literature is available regarding entertainment- growth nexus at both theoretical and empirical fronts. To the best of our knowledge not a single study has still been conducted which incorporates the role of both films production and cricket matches played in augmenting the growth of an economy. The limited existing literature can be divided into three categories as per findings: expected, unexpected and inconclusive. According to expected results entertainment industry should have positive impact on economic growth, while unexpected results indicate that entertainment halts the economic growth due to high costs attached with. However, inconclusive results are those which reveal statistically insignificant impact of entertainment on growth. Badde [1] conducted a study for 36 metropolitan areas of United States of America (USA) to investigate the significance of economic impact of pro-sport activities by adjusting it for fixed and unique effects he revealed that once fixed effects are factored out, unique behavior can be investigated for evidence of sports contribution to economic growth. The results provided no support for general argument that professional sports and stadiums have significant impact on economic growth. It was concluded that public funding for sports and stadiums is not a profitable investment. Crompton et. al.[6] studied the economic impact of sports facilities and events. He concluded that sports facilities facilitate the economic growth of a country. [13,31,27] concluded that hosting mega events no doubt had been viewed as a source to enhance growth, but since it requires a substantial infrastructural build ups, so spending on such activities might not augment the growth. Authors in [16, 28,18, 4,,16 and 11] found hosting the mega events is though beneficial for the economy, but these benefits are always exaggerated. The benefits however dominate the costs. Forman, et. al., [9] studied the impact of mega sports events on tourists’ arrival in South Africa and suggested that these mega events promote tourism, but the magnitude depends upon the types of event. The previous literature is found limited to some cross country studies. This study distinguishes itself from the existing ones by probing the long run causal relationship between films, cricket matches and economic growth. 3. THEORETICAL FRAMEWORK Entertainment industry probably supports the economy by its forward and backward linkages to the growth process. Both films and sports events attract large number of people including producers, actors, players, technical staff and spectators from all over the world which raises the level of aggregate demand for goods, services and labor. It triggers a chain of activities like demand for tourism, accommodation facilities, food items, transportation services, health services and local labor in a particular economy. This increases consumption, which is the first and perhaps the most important component of economic growth. Rise in level of consumption causes an increase in the profits and the producers in order to cater the market demand invest more to raise the level of production. At one side it allows the firms to exploit the economies of scale and on the other side it gives additional employment opportunities. These events also have backward linkages with supporting industries as: footwear, health care, construction, food supplements and media and advertisement etc. Higher level of consumption due to influx of masses and development of supporting industries enhances the economic growth, which strengthens the public sector of an economy as the government revenue collection increases in the face of rising employment and income. Actually, it is the rationale behind