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Going for the Gold: The Economics of the Olympics

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  • Robert A. Baade
  • Victor A. Matheson

Abstract

In this paper, we explore the costs and benefits of hosting the Olympic Games. On the cost side, there are three major categories: general infrastructure such as transportation and housing to accommodate athletes and fans; specific sports infrastructure required for competition venues; and operational costs, including general administration as well as the opening and closing ceremony and security. Three major categories of benefits also exist: the short-run benefits of tourist spending during the Games; the long-run benefits or the "Olympic legacy" which might include improvements in infrastructure and increased trade, foreign investment, or tourism after the Games; and intangible benefits such as the "feel-good effect" or civic pride. Each of these costs and benefits will be addressed in turn, but the overwhelming conclusion is that in most cases the Olympics are a money-losing proposition for host cities; they result in positive net benefits only under very specific and unusual circumstances. Furthermore, the cost–benefit proposition is worse for cities in developing countries than for those in the industrialized world. In closing, we discuss why what looks like an increasingly poor investment decision on the part of cities still receives significant bidding interest and whether changes in the bidding process of the International Olympic Committee (IOC) will improve outcomes for potential hosts.

Suggested Citation

  • Robert A. Baade & Victor A. Matheson, 2016. "Going for the Gold: The Economics of the Olympics," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 201-218, Spring.
  • Handle: RePEc:aea:jecper:v:30:y:2016:i:2:p:201-18
    Note: DOI: 10.1257/jep.30.2.201
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    References listed on IDEAS

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    1. Giles Atkinson & Susana Mourato & Stefan Szymanski & Ece Ozdemiroglu, 2008. "Are We Willing to Pay Enough to `Back the Bid'?: Valuing the Intangible Impacts of London's Bid to Host the 2012 Summer Olympic Games," Urban Studies, Urban Studies Journal Limited, vol. 45(2), pages 419-444, February.
    2. Robert A. BAADE & Robert W. BAUMANN & Victor A. MATHESON, 2010. "Slippery Slope ? Assessing The Economic Impact Of The 2002 Winter Olympic Games In Salt Lake City, Utah," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 31, pages 81-92.
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    Cited by:

    1. Victor Matheson & Daniel Schwab & Patrick Koval, 2017. "Corruption in the Bidding, Construction, and Organization of Mega-Events: An Analysis of the Olympics and World Cup," Working Papers 1706, College of the Holy Cross, Department of Economics.
    2. Paul Dolan & Georgios Kavetsos & Christian Krekel & Dimitris Mavridis & Robert Metcalfe & Claudia Senik & Stefan Szymanski & Nicolas R. Ziebarth, 2016. "The Host with the Most? The Effects of the Olympic Games on Happiness," PSE Working Papers halshs-01349354, HAL.
    3. Ogawa, Ryoh, 2017. "Using REIT Data to Assess the Economic Worth of Mega-Events: The Case of the 2020 Tokyo Olympics," MPRA Paper 78829, University Library of Munich, Germany.
    4. Brad R. Humphreys & Bruce K. Johnson & John C. Whitehead, 2017. "Validity and Reliability of Contingent Valuation and Life Satisfaction Measures of Welfare: An Application to the Value of National Olympic Success," Working Papers 17-08, Department of Economics, Appalachian State University.
    5. repec:eee:spomar:v:20:y:2017:i:3:p:285-295 is not listed on IDEAS
    6. Nicholas Le, 2018. "Evaluating Crime as a Negative Externality of Hosting Mega-Events: Econometric Analysis of the 2012 London Summer Olympics," Working Papers 18-01, Department of Economics, West Virginia University.
    7. Bent Flyvbjerg & Allison Stewart & Alexander Budzier, 2016. "The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games," Papers 1607.04484, arXiv.org.
    8. Paul Dolan & Georgios Kavetsos & Christian Krekel & Dimitris Mavridis & Robert Metcalfe & Claudia Senik & Stefan Szymanski & Nicolas R. Ziebarth, 2016. "The Host with the Most? The Effects of the Olympic Games on Happiness," Working Papers halshs-01349354, HAL.

    More about this item

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • Z21 - Other Special Topics - - Sports Economics - - - Industry Studies
    • Z31 - Other Special Topics - - Tourism Economics - - - Industry Studies

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