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The Olympic Effect

Author

Listed:
  • 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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Suggested Citation

  • Andrew K. Rose & Mark M. Spiegel, 2011. "The Olympic Effect," Economic Journal, Royal Economic Society, vol. 121(553), pages 652-677, June.
  • Handle: RePEc:ecj:econjl:v:121:y:2011:i:553:p:652-677
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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