| Abstract: |
There is perhaps no larger sports policy decision than the decision to host or
bid to host a mega-event like the FIFA World Cup or the Summer Olympics. Hosts
and bidders usually justify their decisions by touting their potential impact.
Many organizers and promoters either fund or widely disseminate ex-ante
studies that tend to highlight the positive effects of the event. For
instance, the consultancy firm Ernst & Young produced a 2010 report prior to
the 2014 World Cup in Brazil that painted an optimistic picture of the event’s
potential legacy. It estimated that an additional R$ 142.39 billion (4.91% of
2010 GDP) would flow through the Brazilian economy over the 2010-2014 period,
generating 3.63 million jobs per year, R$ 63.48 billion (2.17% of 2010 GDP) of
income for the population and additional tax collection of R$ 18.13 billion
(0.62% of 2010 GDP) for the local, state and federal governments. Ernst &
Young estimated that during the same period 2.98 million additional visitors
would travel to Brazil, increasing the international tourist inflow up to 79%.
Such results, if true, would clearly attractive for governments considering a
bid, but these expected impacts don’t always materialize. Moreover, hosting
mega-events requires significant investments - and the cost of these
investments is rising. Zimbalist notes emerging economies like China, Brazil,
and South Africa have increasingly perceived "mega-events as a sort of
coming-out party signaling that [they are] now a modernized economy, ready to
make [their] presence felt in world trade and politics" (Zimbalist 2015).
Their intentions may be noble, but the intention of using mega-events as a
"coming-out party" means developing countries hoping to host them need to make
massive investments. They are confronted by significant obstacles in that they
lack sufficient stadiums, accommodations, transportation systems, and other
sports-related infrastructure. As a result, each of the mega-events hosted by
emerging economies has been exorbitantly expensive. The 2014 World Cup cost
Brazil between USD 15 billion and USD 20 billion, while Beijing reportedly
spent USD 40 billion prior to the 2008 Summer Olympic (Zimbalist 2015).
Additionally, as the debt-ridden 1976 Summer Olympics in Montreal
demonstrates, expensive mega-events are not limited to emerging economies
alone. Flyvbjerg and Stewart have even shown that every Olympics since 1960
has gone over budget (Flyvbjerg and Stewart 2012). Such incredible figures, in
terms of both costs and benefits, beget the question: are mega-events worth
it? Which type of reports should governments focus their attention on? What
economic consequences should a government reasonably expect? With such high
stakes, policymakers need to choose wisely. We attempt to answer these
questions and aid the decisions of policymakers by providing a concise review
of the rich academic literature on mega-events. For the purposes of this
paper, we mainly focus on the Summer Olympic Games and the FIFA World Cup as
mega-events. However, we also leverage information regarding events like the
Winter Olympic Games, the UEFA football championships, and the Commonwealth
Games. These events are organized on a smaller scale than the previous two,
but they might provide some insights on how to best understand mega-events. We
focus on claims surrounding the direct or indirect mechanisms that facilitate
the impact that ex-ante studies predict. We provide a review of these claims
and their validity according to the existing literature. Section 1 focuses on
the argument that mega-events lead to increased economic activity in the host
economy. Specifically, we evaluate whether or not mega-events leads to access
to previously inaccessible funds and increased investments. These investments
could theoretically come from supranational organizations, private
stakeholders, or public stakeholders. We also consider whether or not these
new expenditures and investments have the multiplicative effect that many
ex-ante studies assume they have. We finally investigate if the economic
activity surrounding mega-events leads to increased revenues and tax
collection for host governments. Overall, the existing academic literature
suggests that any increased economic activity resulting from the event is
routinely dwarfed by additional public budgetary commitments. Moreover, the
arguments regarding multiplicative effects and increased revenues also tend to
be exaggerated. Section 2 shifts the focus to the potential impact of
mega-events on a specific industry: tourism. We explore the effect of
mega-events on the number of tourists visiting the host region and their
spending habits. We explore this channel both for analyses specific to a
single mega-event and for cross-country evaluations incorporating many events.
Next, we consider the impact of a mega-event on a region’s brand and image in
the international community with the idea of testing if hosting the
competition will impact future tourism. Finally, we consider if mega-events
lead to increases in the capacity of a city or country to welcome future
tourists as a result of improved airport infrastructure, accommodations,
and/or transportation systems. As was true in Section 1, the academic
literature suggests that the claims of many ex-ante studies are misleading.
Our review finds that there is some evidence for increases in tourist arrivals
to certain events, but those increases are far smaller than what is generally
predicted beforehand. These effects are also usually dependent on factors,
such as the timing of the competition, that are specific to the host region
and the event itself. Section 3 briefly discusses other potential qualitative
and social impacts of mega-events such as international business relations,
crime reduction, and the "feel-good effect." In the penultimate section,
Section 4, we discuss how these conclusions should impact the decision-making
of policymakers. Finally, in a short conclusion, we summarize the findings of
our review. |