The Olympic Effect

50 Pages Posted: 15 Apr 2009

See all articles by Andrew Kenan Rose

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Mark M. Spiegel

Federal Reserve Bank of San Francisco - Economic Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: April 2009

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: candidate, data, host, liberalization, mega-event, model, signaling, trade

JEL Classification: F19, L83

Suggested Citation

Rose, Andrew Kenan and Rose, Andrew Kenan and Spiegel, Mark M., The Olympic Effect (April 2009). CEPR Discussion Paper No. DP7248, Available at SSRN: https://ssrn.com/abstract=1382744

Andrew Kenan Rose (Contact Author)

University of California - Haas School of Business ( email )

Berkeley, CA 94720
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510-642-4700 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/arose

NUS Business School ( email )

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Singapore

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mark M. Spiegel

Federal Reserve Bank of San Francisco - Economic Research Department ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3184 (Phone)
415-974-2168 (Fax)

HOME PAGE: http://www.frbsf.org/economics/economists/mspiegel.html

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