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The long term effects of hosting the Olympic Games

ECONOMIST TOOLKIT II (U20441)

Since the first modern Olympic Games numerous cities have applied to host the
iconic mega sporting event. The prevailing debate whether the expenditure of $100
million (Rose & Spiegal, 2011) solely on opening ceremonies and with averaging a
total of cost $10 billion (Billings & Holiday Scott, 2012) will outweigh the enhancing
benefits to the host city and countrys economy or, just a glorified expense with no

The long term effects of


hosting the Olympic
Games
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long term impacts.


A considerable amount of studies have investigated into the initial impact of hosting
the Olympic Games. Many of them suggest and conclude that Olympiad hosts gain
short-term benefits. Yet surprisingly, very few studies have researched into the long
term benefits post the Olympic Games. Billings & Holiday Scott (2012) consider the
long-term effects on the hosting countrys economy growth and suggest the
variables of employment, GDP per capita and trade openness all improve as a direct
result of hosting the games. Similarly, Rose & Spiegal (2011) investigate the longterm effects of the hosting an Olympiad but restrict their research on the variable of
trade openness, suggesting it increases due to the The Olympic Effect. Conversely,
Jasmand & Maennig (2008) refine their study by researching into the regional effects
on the income and employment on a case study of the 1972 Munich Olympiad,
stating that the venue areas reaps the benefits of the Olympics in contrast to other
regions in Germany.
The impact of the Olympic Games is sizable and invaluable to the hosting city as a
result of its mainstream exposure. Both Billings & Holiday Scott (2012) and Jasmand
& Maennig (2008) collect data sets from 1950-2006 from International and National
Olympic Committees of each Olympiad hosts, as their treatment group and the
finalist in each Olympiads bidding for their control group. Interestingly, Billings &
Holiday Scott (2012) separate their data sample into independent groups and only
allocated each city to one Olympics, regardless of the amount of times it actually bid.
On occasions, there were no finalists for the control group and cities from countrys
individual selection procedure were employed instead. The implication of using
countries individual selection process eliminates aspects such as exposure that can
ultimately affect variables of interest and consequently, each countrys economy long
term. Conversely, Rose & Spiegal (2011) did not adopt this approach as they
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refused to drift from the original set of data. Their data set also only consisted of

Moreover, the theory that hosting the Olympic Games liberalises trade for the

summer Olympic Games due to the higher scale and exposure they received

hosting country has been a variable of interest in two of the three concerning papers.

compared to the winter games. Thus, the data set used can be easier to generalise

The findings present a positive effect on a countrys trade openness when compared

than those Billings & Holiday Scott (2012) and Rose & Spiegal (2011).

to other candidates and runners up. Consequently, a result of hosting the Olympics

Furthermore, in order to test their theories both Billings & Holiday Scott (2012) and
Jasmand & Maennig (2008) used the econometric measure of the Difference-indifference (DID) estimator in order to compare pre-Olympiad and post-Olympiad.
Although the two individual studies use the same estimator, they both have interest
in different variables. Jasmand & Maennig (2008) use DID in order to test the
variable of interest, GDP, GVA shares and employment for the regions in selection
for both their treatment and control groups whereas Billings & Holiday Scott (2012)
variables of interest slightly differed; population, GDP per capita and the effect of
trade openness. Conversely, trade openness is the central theme for Rose & Spiegal
(2011) research, unlike Billings & Holiday Scott (2012) who use the DID model to
test their hypothesis regarding the effect of trade openness after hosting the games,
Rose & Spiegal (2011) adopt the commonly known gravity model to access its
impact.

has a positive effect on trade openness. The trade openness of the average hosting
city resulted in it being doubled after the Olympiad, (34.1), compared to its level in
the pre-Olympic phase Billings & Holiday Scott (2012). Similarly, Rose & Spiegal
(2011) found a positive effect on the hosting countrys trade openness that was
significant and permanent, aiding to the economys long-term growth. The Olympic
host witnessed a robust 39% Olympic Trade Effect and as well as the control group,
several Olympic Host Candidates, increase by 22% (Rose & Spiegal, 2011).
Although both of the studies find similar results in an increase in trade openness
after hosting an Olympiad, the results have their limitations. Both of the studies
express that their result magnitude are too large to be a direct and primary effect of
the Games. Additionally, Rose & Spiegal (2011) results state that bidding countries
have also experienced a large increase in trade. Thus, the infrastructure and
economic fundamentals that are famously associated with the hosting of the games
and the effect on trade cannot solely be a direct long-term effect of hosting the

Additionally, in order to implement the DID model Billings & Holiday Scott (2012) and
Jasmand & Maennig (2008) analyse the extent of the effect over time by a
comparison of different periods in time. Although both of the two papers use similar
periods, their definitions differ. Jasmand & Maennig (2008), restrict their sample by
only conducting research on the case study of the Munich Olympic Games.
Therefore, their pre-Olympic phase consisted of data from 1962 to 1971: the Olympic
period, the year of 1972 and finally; the post-Olympic period from the end of 1972 to
1988. Whereas, Billings & Holiday Scott (2012), data set also consists of the same
three periods but boundaries of time were distinctly different. The Pre-Olympic period
occurred before the announcement of the host city was made; the duration between
the announcement and the actual Olympiad; as well as the aftermath of the games.
Arguably, the studies separation of time can be valid and externally reliable.
However, Billings & Holiday Scott (2012) period separation can be credited

games.
Moreover, the long-term effect on GDP per capita has been found to coincide with
the theory of hosting the Olympic Games. Billings & Holiday Scott, (2012) express
that their coefficients for real GDP per capita express that those who are selected as
host cities, on average, increase their income by $4,865 more than the rest of the
their data set. Jasmand & Maennig (2008) additionally find an increase in German
GDP post-Olympiad, German GDP, in cereris paribus. Their host cites witnessed
average income to some extent increase in venues regions 0.7 to 0.76. However,
although both studies expressed that GDP in the long term increased, it needs to be
considered that Jasmand & Maennig (2008) restrict their research to the case study
of the Munich Games. This can slightly reduce the validity of the results, as they
cannot truly be generalised.

commendable and easier to generalise when concerning the impact of the Olympic

In conclusion, the research in the three concerning papers address the Olympic

Games. Exposure of the hosting city occurs years before the actual event, which can

Games have on the hosting city in the long term. All three of the papers design their

thus add to the country's economy and the variables of interest.

studies in similar yet diverse ways. Jasmand & Maennig (2008) case study on the

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Munich Olympic Games and the comparison of German regions is a sample which

Bibliography

personally, I would not adopt. This is due to the lack of generalisability of the case

Billings, S., & Holiday Scott, J. (2012). Should Host Citites Go For The Gold? The Long Term Impacts Of
Hosting The Olympics. Economic Inquiry, 50(3), 754-772.

study to other Olympic hosts and the fact that Germany economy has boosted can

Jasmand, S., & Maennig, W. (2008). Regional Income and Employment effects of the Munich
Summer Olympic Games. Regional Studies, 42.7, 991-1002.

be due to numerous other factors.


Furthermore, the results of an extreme increase in trade openness as well as GDP
per capita are results that I personally hold reservations to. This is because all the
three studies only focus on the event of the Olympiads and do not take into
consideration other events that could also impact on the countrys GDP and trade

Rose, A., & Spiegal, M. (2011). The Olympic Effect. The Economic Journal, 121, 652-677.

openness such as the development in factors of production or other events that


could also boost the economy in the long term. Therefore, I would be inclined to
direct research into selected fields of research upon the effect of infrastructure
development as a result of the games and its impact on the countrys economy
instead of focusing on variables such as trade openness like Rose & Spiegal (2011)
and Billings & Holiday Scott (2012). I would also be inclined to use the DID model so
that comparison before hosting the games and afterwards could be easily compared
with the adoption of Billings & Holiday Scott (2012) time sepratation definitions.
Additionally, the field would be restricted to areas such as railway and underground
improvements as well as the venues in which the games are actually hosted. As a
result of the developments further research would be concentrated on what the
projects can generate in more specific areas such as employment to determine the
long term benefits of hosting the games.

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