Working Paper: NBER ID: w14854
Authors: 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.
Keywords: Olympics; trade; economic impact; signaling; liberalization
JEL Codes: F19; L83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unsuccessful bids for the Olympics (D44) | Increase in national exports (F10) |
| Signaling of trade liberalization intentions (F13) | Increase in national exports (F10) |
| Hosting the Olympics (Z28) | Increase in national exports (F10) |
| Bidding for the Olympics (D44) | Signaling of trade liberalization intentions (F13) |