Who are the Champions? Inequality, Institutions and the Olympics

Abstract

Does a country's level of inequality affect its ability to win Olympic medals? If it does, is it conditional on institutional factors? We argue that the ability of economically free societies to win medals will not be affected by inequality. In these societies, institutions generate incentives to invest in the talent pool of individuals at the bottom of the income distribution (people who are otherwise constrained in the ability to expend resources on athletic training). These effects cancel out those of inequality. In unfree societies, the incentives that promote investments in skills across the income distribution are weaker. Consequently, the effects of inequality on the ability to win are stronger. Using the Olympics of 2012 and 2016 in combination with the Economic Freedom of the World Index, we find that inequality only matters in determining medal numbers for unfree countries. We link these results to the debates on inequality.

Keywords: Olympics, Inequality, Economic Freedom, Institutions

JEL Classification: D63, E02, O43