Touting the economic benefits of hosting the Olympics is s.o.p. for any city aspring to lure the Games. But a new study by the National Bureau of Economic Research throws some cold water on those claims:
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.
Much of the spending on the event by local citizens is a substitute from a different leisure activity or consumption good, rather than true additional spending. Moreover, the projects associated with the games typically seem to be white elephants, such as poorly-used sporting facilities associated with idiosyncratic Olympic sports, or hotels and transportation infrastructure built to accommodate a one-time peak demand of just three weeks.
Here in Chicago, we’ve been assaulted with such specious arguments. Of course, sports fans are accustomed to all of this–it’s really the “build us a new taxpayer-funded stadium and behold the economic growth that follows!” trope writ large. Not surprisingly, it’s just as false.