The Olympic Effect

Andrew Rose () and Mark M Spiegel ()

No 7248, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Economists are skeptical about the economic benefits of hosting "mega-events" such as the Olympic Games or the World Cup, since such activities have considerable cost and seem to yield few tangible benefits. These doubts are rarely shared by policy-makers and the population, who are typically quite enthusiastic about such spectacles. In this paper, we reconcile these positions by examining the economic impact of hosting mega-events like the Olympics; we focus on trade. Using a variety of trade models, we show that hosting a mega-event like the Olympics has a positive impact on national exports. This effect is statistically robust, permanent, and large; trade is around 30% higher for countries that have hosted the Olympics. Interestingly however, we also find that unsuccessful bids to host the Olympics have a similar positive impact on exports. We conclude that the Olympic effect on trade is attributable to the signal a country sends when bidding to host the games, rather than the act of actually holding a mega-event. We develop a political economy model that formalizes this idea, and derives the conditions under which a signal like this is used by countries wishing to liberalize.

Keywords: candidate; data; host; liberalization; mega-event; model; signaling; trade (search for similar items in EconPapers)
JEL-codes: F19 L83 (search for similar items in EconPapers)
Date: Written
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Working Paper: The Olympic Effect (2009)
Working Paper: The Olympic effect (2009)
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