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The Olympic Effect

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  • Andrew K. Rose
  • Mark M. Spiegel

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.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 121 (2011)
Issue (Month): 553 (06)
Pages: 652-677

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Handle: RePEc:ecj:econjl:v:121:y:2011:i:553:p:652-677

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References

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  1. WOLFGANG MAENNIG & STAN du PLESSIS, 2007. "World Cup 2010: South African Economic Perspectives And Policy Challenges Informed By The Experience Of Germany 2006," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 578-590, October.
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Citations

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Cited by:
  1. Asier Minondo & Francisco Requena, 2013. "Estimating the gravity equation with the actual number of exporting firms," Estudios de Economia, University of Chile, Department of Economics, vol. 40(1 Year 20), pages 5-19, June.
  2. Markus Bruckner & Evi Pappa, 2011. "For an Olive Wreath? Olympic Games and Anticipation Effects in Macroeconomics," School of Economics Working Papers 2011-18, University of Adelaide, School of Economics.
  3. Tiziana Cuccia & Calogero Guccio & Ilde Rizzo, 2013. "Does Unesco inscription affect the performance of tourism destinations? A regional perspective," ACEI Working Paper Series AWP-04-2013, the Association for Cultural Economics International, revised Oct 2013.
  4. Lin, Faqin, 2013. "Are distance effects really a puzzle?," Economic Modelling, Elsevier, vol. 31(C), pages 684-689.
  5. Michiel de Nooij & Marcel van den Berg, 2013. "The bidding paradox: why rational politicians still want to bid for mega sports events," Working Papers 13-08, Utrecht School of Economics.
  6. Mathieu Couttenier & Sophie Hatte, 2013. "Mass media effects on the production of information: Evidence from Non-Governmental Organization (NGO) Reports," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 13.01, Université de Lausanne, Faculté des HEC, DEEP.
  7. Robert Baumann & Bryan Engelhardt & Victor A. Matheson, 2012. "Employment Effects of the 2002 Winter Olympics in Salt Lake City, Utah," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 232(3), pages 308-317, May.
  8. Dewatripont, Mathias & Seabright, Paul, 2010. "Rational Crowd-Pleasing and Democratic Accountability," CEPR Discussion Papers 7660, C.E.P.R. Discussion Papers.
  9. Michiel de Nooij & Marcel van den Berg, 2013. "The bidding paradox: why economists, consultants and politicians disagree on the economic effects of mega sports events but might agree on their attractiveness," Working Papers 13-09, Utrecht School of Economics.
  10. Esther Kalkbrenner, 2010. "Acquired versus Non-Acquired Subsidiaries - Which Entry Mode do Parent Firms Prefer," NRN working papers 2010-22, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.

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