There is a large, and still growing, literature on the economic impact of large sporting events (see this post, and the links at the end of it, for some examples). My conclusion from that body of research is that large sporting events are expected to generate large economic impacts (based on studies conducted before the event), but generally the actual economic effects are small or non-existent (when measured after the event). However, the studies are typically based on a single event, or a small number of events. Are the typical null results driven by a small sample size and if so, would a larger and more diverse sample demonstrate different results?
That is the question essentially underlying this 2021 article by Matthias Firgo (Austrian Institute of Economic Research), published in the journal Regional Science and Urban Economics (ungated earlier version here). Firgo looks at the effect of the Olympic Games (both summer and winter) on regional GDP per capita in the host region (not GDP per capita in the whole host country, or only in the host city), using data from the 1992 Winter Olympics in Albertville to the 2020 Summer Olympics in Tokyo. Importantly, Firgo uses a control group made up of regions with cities that had been shortlisted by the International Olympic Committee (IOC) to host in the same year, but were unsuccessful (more on that a bit later).
Because of data limitations, Firgo focuses on GDP per capita as a percentage of national GDP per capita - essentially a relative measure of wellbeing at the regional level. Using this measure, he finds that for the Summer Olympics:
...regional per capita GDP significantly increases by 3.6 %-points (3.3 %-points) relative to national per capita GDP in the year of the event (the year before the event).
In other words, the host region’s GDP per capita rises by around 3 to 4 percentage points relative to national GDP per capita in the lead-up to the event. In contrast, there is only very weak evidence of any persistent effect of the event on regional GDP per capita, and the Winter Olympics (which are a smaller event, and typically held in smaller cities) had no significant effects. The positive effect of the Summer Olympics on regional GDP per capita in the years immediately before the event is consistent with increasing spending on infrastructure (including sporting, transport, hospitality, and cultural infrastructure) in the lead-up to a substantial event. That there is no persistent effect is fairly consistent with the other research on the economic impact of large events.
However, there are two other things to take away from this research. First, if anything these results might overstate the impact of successfully bidding for the Olympics. Whether a potential host city's bid is successful or not is not a random event. Cities that are more likely to be successful hosts should, at least in theory, be more likely to be selected as hosts. So, the control group is an imperfect comparator for the treatment cities in a way that is likely to bias the results. If successful hosts were cities that the IOC believed were already on an upward trajectory at the time of the Olympics, then that would bias upwards the estimated impact of the event. Of course, such foresight from the IOC would have to be executed seven years before the event (which is when the hosts are typically selected), but nevertheless there is potential for upward bias. That said, shortlisted cities are still likely to be a better comparison group than all non-host cities, since they had already demonstrated some capacity and willingness to host.
Second, these results tell us more about relative effects within the host country, rather than absolute economic impacts. They show that the GDP per capita increases in the host region relative to the rest of the country. Given that the overall economic impact is small to negligible, as are population changes arising around the event (both of which many other studies have shown), a large part of the relative increase in GDP per capita in the host region must arise from a combination of increased GDP per capita in the host region, and decreased GDP per capita in other regions in the same country. Effectively then, hosting the Summer Olympic Games simply shuffles income around a country in the lead-up to the games, with the host region benefitting while other regions are negatively impacted. Then after the event, there is a return to the normal inter-regional distribution of incomes.
The Olympic Games is a large spectacle - an opportunity for national celebration as we watch sporting heroes compete to win medals. The evidence still suggests that the Games are not a source of sustained economic growth, and that any short-run gains may be highly localised rather than national, and some of those gains come at the expense of other regions.
Read more:
- Tim Hazeldine on economic impact studies
- Beware economists bearing impact studies of the America's Cup
- Even less reason to believe in the economic impact of the America's Cup
- The overstated impact of the Super Bowl
- The economic impact of the 2010 World Cup in South Africa
- The economic impact of the 2000 Sydney Olympics
No comments:
Post a Comment