Economics and Finance
Journal of Sport Management, 2011, 25 11-23
© 2011 Human Kinetics, Inc.
The Economic Benefits of Mega Events:
A Myth or a Reality? A Longitudinal Study
on the Olympic Games
Chengli Tien
National Taiwan Normal University
Huai-Chun Lo
Yuan Ze University
Hsiou-Wei Lin
National Taiwan University
This study concerns research related to mega events, such as the Olympic Games, to determine whether the economic
impact of the Olympic Games on the host countries is significant. This study uses two methods, panel data analysis and
event study, to test hypotheses based on the data from 15 countries that have hosted 24 summer and winter Olympic Games.
The results indicate that the economic impact of the Olympic Games on the host countries is only significant in terms of
certain parameters (i.e., gross domestic product performance and unemployment) in the short term. These findings provide
decision makers with comprehensive and multidimensional knowledge about the economic impact of hosting a mega event
and about whether their objectives can be realized as expected.
As “global properties” (O’Reilly, Lyberger, McCarthy, & Séguin, 2008, p. 392), mega events may have a
tremendous impact, which, in general, can be found in
economic, tourism, physical, social, cultural, psychological, and political aspects of a hosting region (Parent, 2008;
Ritchie, 1984; Ritchie & Aitken, 1985). Although some
may still argue about what can be properly categorized
as mega events, the summer and winter Olympic Games
without a doubt can be classified as such (Fairley, Kellett,
& Green, 2007; Toohey & Taylor, 2008).
Due to the increasing influence of the Olympic
Games and the attention it receives worldwide, a number
of countries derive pride and prestige from hosting this
event and regard it as a showcase to the world or an
opportunity to achieve certain objectives. Regardless of
a country’s specific objectives, the competition to win
the bid for hosting the Olympic Games has become more
intense, especially since the commercial success of the
1984 Los Angeles Olympic Games. Not only the competition, but also the scale, complexity, and cost to host the
Olympic Games have grown, thus creating some concerns
for taxpayers as well as for bidders, who should carefully
consider the rewards and risks in pursuing this Olympic
dream. Take the 1992 Barcelona Olympic Games, for
example; it cost the host city and country over US $10
million to bid and US $10.7 billion to host (Burton, 2003),
and such costs exceed the annual gross domestic product
(GDP) of some nations (e.g., The Bahamas).
Is it worth staging a mega event, such as the Olympic
Games? This is an important research question, which
was also addressed by Salt Lake Olympic Chief, Mitt
Romney, who considered it a fair question (Foy, 2002).
Because a wide range of effects can be anticipated as a
result of hosting mega events, this question should be
asked in terms of the objectives that each host country
expects to achieve. These objectives may vary from
nation to nation, but the overall objective can involve a
strategic and economic focus. “For example, the Athens
2004, Turin 2006, Beijing 2008, and Vancouver-Whistler
2010 Olympic Games bid and organizing committees
all presented the Olympic Games as beneficial to their
respective cities to gain new facilities and increase transfer to event preparation and hosting knowledge” (Parent,
2008, p. 135). Hence, from a strategic perspective, the
objectives may include bringing the country into the
limelight or spotlighting the city/state or region; from an
economic perspective, the objectives may include attracting investment or creating jobs (Nixon & Frey, 1996;
Preuss, 2000). Among these objectives, “it is the economic value accruing to the host that is commonly used
as the basis for gathering public backing for such events”
(Lee & Taylor, 2005, p. 595). This study will therefore
Tien is with Dept. of East Asian Culture and Development, National Taiwan Normal University, Taipei, Taiwan, Province of China. Lo is with the
Division of Finance, College Management, Yuan Ze University, Taipei, Taiwan, Province of China. Lin is with the Dept. of International Business,
National Taiwan University, Taipei, Taiwan, Province of China.
11
12 Tien et al.
focus on the economic impact of the Olympic Games
upon the host countries, aiming to ascertain whether
staging the Olympic Games is economically worthwhile
and whether the anticipated economic benefits from the
Olympic Games are a reality or a myth.
Prior studies from various perspectives report mixed
findings in terms of mega events’ contributions to the
host area’s economy (Owen, 2005; Veraros, Kasimati,
& Dawson, 2004). To explore the economic impact of
the Olympic Games, this study attempts to answer the
following research question: Is it worth staging a mega
event, such as the Olympic Games? The present study
takes an ex post approach by using the panel regression
model and event study to test each of the key economic
parameters to uncover findings that are convincing
enough to ascertain the economic benefits of mega events.
Hosting a mega event requires tremendous infrastructure
and construction, and this takes a number of years to
complete. Hence, the economic impact may not be significant during, right before, or right after the year of the
Olympic Games, so a longer period of time is required to
study the event’s overall effects. The present study uses
a nine-year time span (four years before the Olympic
Games, the year of the Olympic Games, and four years
following the Olympic Games) to examine the economic
impact of hosting the Olympic Games, including GDP
performance, unemployment, and investment.
The findings of the current study indicate that hosting the Olympic Games does not produce a long-term
impact on the host countries, but it does produce a shortterm impact on the GDP and unemployment of the host
countries (the significant impact only occurs before the
Olympic Games, not during or after the Olympic Games).
Hence, hosting the Olympic Games only generates a
short-lived impact on the host countries, which is consistent with the finding of Baade and Matheson (2002).
In particular, the current study finds that the impact on
the GDP and unemployment is more significant in those
countries that host the summer Olympic Games, which
require more spending than the winter Olympic Games.
This study thus makes two fundamental contributions
to the literature on mega events. First, it illustrates in a
longitudinal manner any economic impact on host countries arising from the hosting of the summer or winter
Olympic Games. Prior studies focused on a single country
(Brunet, 1995; Hotchkiss, Moore, & Zobay, 2003; Humphreys & Plummer, 1995; Madden, 2002), on a single
economic aspect (Kavetsos & Szymanski, 2008; Samitas,
Kenourgios, & Zounis, 2008; Veraros et al., 2004), or on
a single game phase (Pyo, Cook, & Howell, 1988), but
not on a selection of host countries from a longitudinal
perspective including the pre-Games phase, the Games
phase, and the post-Games phase. The findings should
enrich future researchers’ understanding of the economic
impact of hosting the Olympic Games on a selection of
host countries from a long-term perspective. Second, the
current study explores the economic impact of hosting
the Olympic Games during different Games phases, such
as the pre-Games phase, instead of merely the Games
phase. This expansion in scope may explain why some
prior studies find hosting the Olympic Games to have a
weak or insignificant impact. Therefore, the importance
of using a longitudinal approach to analyze or extend
related issues is highlighted.
This study is comprised of five sections. The first
section provides an overview of mega events and their
impact. The second section addresses the method and data
analyzed from countries that have hosted the Olympic
Games since 1964, while the third section presents the
results of the models run in the Stata, SPSS, and SAS
software programs. Finally, the fourth section addresses
the conclusion and implications based on the findings,
and the final section discusses limitations that can be
addressed for future research.
Literature and Hypotheses
Mega Events: The Olympic Games
Scholars still debate what mega events are; however, the
Olympic Games can undoubtedly be categorized as a
mega event (Horne & Manzenreiter, 2006; Roche, 2000).
Thus, the current study analyzes mega events, with a
focus on the Olympic Games.
According to the Olympic Charter (n.d.), “Olympism
is a philosophy of life, exalting and combining in a balanced whole the qualities of body, will, and mind” (p. 12).
Blending sport with “culture and education, Olympism
seeks to create a way of life based on the joy of effort,
the educational value of good example and respect for
universal fundamental ethical principles” (p. 12). Olympism emphasizes the existence of a peaceful society with
human dignity achieved through sport events to elaborate
a state of mind based on equality; this makes the Games
more than just a sport competition.
Scholars disagree about the origin of the ancient
Olympic Games, but it is certain that Greece originally
held the Olympic Games in the BC era (Barney, 1996;
Davis, 2008). The Olympic Games are best known in
their modern form, however. The modern Games were
first held in 1896 in Athens, Greece. Ever since that time,
they have steadily expanded and have attracted thousands
of participants and millions of viewers worldwide. The
impact from such an event is always expected to be
tremendous, but also various and uncertain. Thus, the
objectives for hosting the Olympic Games may vary from
nation to nation.
Host Countries’ Objectives
Mega events help to meet the economic and cultural needs
and rights of local citizens and, if they are successful,
“long-term positive consequences in terms of tourism,
industrial relocation, and inward investments” can be
expected (Roche, 1994, p. 2). Thus, the value of and
objectives for hosting the Olympic Games should reach
beyond medal counts and extend to more wide-ranging
effects (e.g., economic, tourist-related, environmental,
Economic Benefits of Mega Events 13
sociocultural, psychological, and political; Ritchie, 1984;
Ritchie & Aitken, 1985) because the overall effect of
different Olympic Games is “measured in the infrastructure, social, political, ecological, and sporting impulses”
(Preuss, 2000, p. 122). In other words, the impact of
hosting the Olympic Games can far surpass financial
benefits. As a matter of fact, the Olympic Games and
their host countries have greatly emphasized sustainable
development (i.e., the Green Games of Sydney 2000, the
Games of Culture of Athens 2004, the People’s Olympics of Beijing 2008, and the One Planet Olympics of
London 2012), which is, as the United Nations (n.d.)
defines it, “development that meets the needs of the
present without comprising the ability of future generations to meet their own needs” (p. 6). Hence, sustainable
development refers to “a path of socio-economic development that is financially balanced, socially equitable,
ethically responsible, and adequately integrated in the
long-term ecological balance” (Furrer, 2002, p. 2) of the
environment. It is three-dimensional in nature: economic,
social, and environmental (Furrer, 2002). Since mega
events may have wide-ranging effects on host regions,
countries host mega events for a variety of reasons. In
general, this study conceptualizes these reasons in terms
of both economic and strategic objectives. The economic
objectives include GDP performance, employment, and
investment. The strategic objectives include regional
image and identity, urban infrastructure, and cultural and
political improvements.
Impact of the Olympic Games
Successful events not only improve earnings, employment opportunities, and government revenues, but also
raise “awareness and knowledge of the country or region
involved” (Lee, Lee, & Lee, 2005, p. 840). Prior studies have been conducted on the Olympic Games from
various perspectives, such as that of power and politics
(Hargreaves, 2000; Hazan, 1982; Lenskyj, 2000), culture
(Blain, Boyle, & O’Donnell, 1993), urban policy and
environments (May 1995; Roche, 1994), tourism (Kang
& Perdue, 1994; Lee, Var, & Blaine, 1996), destination
image (Gibson, Qi, & Zhang, 2008; Lee et al., 2005),
and economics (Kim, Rhee, Yu, Koo, & Hong, 1989;
O’Brien, 2006; Porter & Fletcher, 2008; Preuss, 2000,
2004). The present study focuses on economic sustainable development. The rationale behind this approach is
that macroeconomic objectives and impacts should still
be the major concerns for most host countries. “It is the
economic value accruing to the host that is commonly
used as the basis for gathering public backing for such
events” (Lee & Taylor, 2005, p. 595). In fact, prior studies
have addressed the impact of mega events on economic
issues using ex ante forecasts or ex post examinations.
The latter approach may be more useful in “providing a
filter through which the promises made by event boosters
can be strained” (Baade & Matheson, 2004, p. 346) and
in examining “a local economy for evidence of the net
impact of professional sports” (Coates & Humphreys,
1999, p. 603), but the amount of such literature is much
smaller (Coates & Humphreys, 1999). To fill the gap,
this study focuses on the economic impact of both the
summer and winter Olympic Games on host countries
by using a quantitative, ex post approach.
The Economic Impact. This study distinguishes finan-
cial impact from economic impact. The financial impact
may narrowly refer to the impact on the budgetary or
financial balance of the organizing committees of the
Olympic Games; however, the economic impact may
refer more broadly to the impact on the general economy
of a host country (PricewaterhouseCoopers, 2004).
Hence, the current study examines possible economic
objectives, such as boosting GDP performance, reducing
unemployment, and attracting investment.
“In world sports, the Olympic Games are unparalleled in their scale” and in “the potential impact they
can have on the economies of host cities, regions, and
countries” (O’Brien, 2006, p. 240). Regarding GDP performance, the arguments have been mixed because the
impacts can be uncertain (Kim, Gursoy, & Lee, 2006).
The initial investment for hosting the Olympic Games can
be tremendous, and, thus, uncertainties may occur and
lead to both opportunities and risks. From the perspective
of opportunities, successful Olympic Games may trigger
economic growth and development (Metropolis, 2002,
as cited in Furrer, 2002). However, from the perspective
of risks, hosting the Olympic Games may be too expensive to generate economic rents and may further lead to
worse situations when huge investment projects become
“White Elephants” after the events or when these projects
create adverse effects that may crowd out a nation’s other
important projects. Lenskyj (2000) created a summary
of criticism against the Olympic Games that includes
distortions in the local economy and hindrances to sustainable economic development. Taking into account the
opportunities and risks, comprehending the impact of the
Olympic Games on host countries’ GDP performance
may be difficult because this strategy to boost GDP
performance through hosting mega events is considered
“a potentially high-risk strategy for stimulating local
economic growth” (Andranovich, Burbank, & Heying,
2001, p. 113). Prior studies on a single host country have
resulted in mixed findings (Brunet, 1995; Humphreys &
Plummer, 1995; Madden, 2002), but such studies from
a longitudinal perspective are scarce. Hence, the impact
of hosting the Olympic Games on the GDP performance
of the hosting regions requires further examination, so
the current study constructs the first hypothesis in a null
form to explore this issue:
Hypothesis 1: Hosting the Olympic Games has no
effect on GDP performance.
Host countries regard the reduction in unemployment
as an expected benefit of hosting the Olympic Games.
For example, the increase in the number of tourists and
the opening of new facilities (e.g., hotels, sport venues)
create jobs and thus reduce unemployment. Prior studies
14 Tien et al.
Methods and Data
on the 1996 summer Olympic Games show a positive
correlation between hosting the Olympic Games and
employment (Hotchkiss et al., 2003). However, few studies have longitudinally tested the impact on employment
opportunities on an entire country, which may receive
less benefit than the hosting city, and done so using a
selection of both summer and winter Olympic Games.
Further testing is needed to ascertain whether hosting the
Olympic Games may impact employment opportunities;
thus, the current study constructs the second hypothesis
in a null form to explore this issue:
Data and Sample
Data were collected from the Datastream, World Bank,
United Nations, Total Economy, and WDI databases and
from the official Web site of the Olympic Movement.
Due to data availability, this study pools the data based
on the Olympic Games (summer and winter) after 1964
(from the 1964 summer and winter Olympic Games to
the 2008 summer Olympic Games). The final sample
spans 15 countries and 24 games. For the sample of GDP
(See Table 1: n = 870), the data collection period ranges
from 1950 to 2008; however, the first year of data are
lost due to the calculation of GDP growth. Therefore,
the number of observations is 870. For the sample of
unemployment rate and investment, the total number of
observations is smaller (n = 613 for unemployment; n =
602 for investments), and the start and end year of data
for each country is different; however, if the start and
end year of data for each country is fixed, the current
study’s main findings will not be affected. For example,
if the data collection period is set to from 1972 to 2007,
or if countries not meeting the required criteria, such as
the length of time period, or those with missing data are
eliminated, the main findings will remain consistent.
The present study includes three phases (pre-Games
phase, Games phase, and post-Games phase) to study
the economic impact. Hence, nine years of data are
collected to study each of the Olympic Games under
examination (four years before and four years after the
Hypothesis 2: Hosting the Olympic Games has no
effect on unemployment.
A successful major event creates confidence in
the city and favors subsequent investment (Metropolis,
2002, as cited in Furrer, 2002). Other than direct investment in the events and their related infrastructure (e.g.,
transportation and housing), hosting the Olympic Games
can be regarded as an attempt to attract international
investment or to establish new trade relationships in
macroeconomic terms. However, few studies have tested
investment in a longitudinal manner using a selection of
both the summer and winter Olympic Games. Further
testing is still needed to determine whether hosting the
Olympic Games may impact investment; thus, the current study constructs the third hypothesis in a null form
to explore this issue:
Hypothesis 3: Hosting the Olympic Games has no
effect on investment in the host country.
Table 1a Descriptive Statistics and Correlations
Panel Data
GDP Performance
Unemployment
Investment
Country
Start
End
N
Start
End
N
Start
End
N
USA
1951
2008
58
1951
2008
58
1961
2006
46
Austria
1951
2008
58
1987
2008
22
1972
2007
36
Yugoslavia
1951
2008
58
1986
2003
18
France
1951
2008
58
1961
2007
47
1971
2007
37
Germany
1951
2008
58
1951
2008
58
1972
2007
36
Italy
1951
2008
58
1971
2008
38
1966
2007
42
Norway
1951
2008
58
1961
2008
48
1961
2007
47
Canada
1951
2008
58
1961
2008
48
1961
2006
46
Japan
1951
2008
58
1954
2008
55
1961
2006
46
Greece
1951
2008
58
1962
2008
47
1961
2007
47
Spain
1951
2008
58
1962
2008
47
1972
2007
36
Australia
1951
2008
58
1971
2008
38
1966
2007
42
Mexico
1951
2008
58
1988
2008
21
1961
2007
47
Korea
China
1951
1951
2008
2008
58
58
1964
1986
2008
2008
45
23
1961
1961
2007
2007
47
47
Total
870
613
602
Economic Benefits of Mega Events 15
Table 1b Descriptive Statistics and Correlations (continued)
GDP Performance
Variable
Mean
S.D.
GDP
Performance
Pre-Games
Phase
Games
Phase
GDP Performance
0.0417
0.0361
1
0.074**
-0.022
-0.056
0.190***
0.178***
Pre-Games Phase
0.0793
0.2704
0.078**
1
-0.054
-0.001
-0.044
-0.062
Games Phase
0.0782
0.2686
-0.037
-0.054
1
-0.049
-0.049
-0.069**
Post-Games Phase
0.0736
0.2612
-0.071**
-0.001
-0.049
1
-0.062
-0.080**
Population Growth
0.0102
0.0097
0.314***
-0.034
-0.044
-0.062
1
0.295***
Country of Origin
0.2667
0.4425
0.248***
-0.062
-0.069**
-0.080**
0.335***
1
Mean
S.D.
Unemployment
Pre-Games
Phase
Games
Phase
Unemployment
0.0006
0.0082
1
-0.119***
0.014
-0.018
-0.065**
0.034
Pre-Games Phase
0.0930
0.2906
-0.137***
1
-0.063
-0.002
-0.015
-0.058
Games Phase
0.0914
0.2883
0.015
-0.063
1
-0.060
-0.013
-0.071**
Post-Games Phase
0.0897
0.2860
-0.025
-0.002
-0.060
1
-0.039
-0.054**
Population Growth
0.0085
0.0092
-0.087 **
0.010
0.010
-0.032
1
0.128 ***
Country of Origin
0.1746
0.3799
0.035
-0.058
-0.071**
-0.054**
0.210***
1
Mean
S.D.
Investment
Pre-Games
Phase
Games
Phase
Investment
-0.0003
0.0376
1
0.034
-0.021
0.006
0.032
0.039
Pre-Games Phase
0.0930
0.2907
0.079
1
-0.065
-0.002
-0.021
-0.056
Games Phase
0.0947
0.2930
-0.051
-0.065
1
-0.063
-0.027
-0.085**
Post-Games Phase
0.0914
0.2884
-0.004
-0.002
-0.063
1
-0.036
-0.094**
Population Growth
0.0097
0.0105
0.078
-0.009
-0.019
-0.033
1
0.379***
Country of Origin
0.2342
0.4239
0.069
-0.056
-0.085**
-0.094**
0.496***
1
N
Post-Games Population
Phase
Growth
Country
of Origin
870
Unemployment
Variable
N
Post-Games Population
Phase
Growth
Country
of Origin
613
Investment
Variable
N
Post-Games Population
Phase
Growth
Country
of Origin
602
** p < .05 *** p < .01
year of the Games). For those Games after 1964, this
study includes the 2006 Turin Olympic Winter Games
and the 2008 Beijing Olympic Games, with no sufficient
length of data for the longitudinal analysis. However, no
difference is observed whether the 2006 Turin Olympic
Winter Games and the 2008 Beijing Olympic Games
are included.
Research Design
This study employs two methods, the first of which uses
cross-sectional time series regression (panel data) analysis to test the hypotheses. Equation (1) uses this model to
test whether hosting the Olympic Games will have any
effect on economic performance.
gi ,t = β 0 + β1di ,1 + β 2 di ,2 + β3 di ,3 + β 4 Popgi ,t + β5 Developingi ,t + ε
(1)
where the dependent variable, gt, represents differences in unemployment rates, investment, and GDP
growth rate, and the independent variables are as follows:
di,1. t=–2~–4 represents three years before the Olympic
Games phase; di,2. t=–1~–1 represents three years for
the Olympic Games phase; di,3. t = 2~4 represents three
years after the Olympic Game phase; β 4 Popgi ,t represents population growth; and Developingi ,t represents
16 Tien et al.
the country of origin. To reduce and avoid any potentially undetected variations due to the country effect
(host country) and the time effect (year), this study
includes dummies for country and year by using crosssectional time series regression on fixed effects in its
model.
The second method is based on event study.
This study uses an observation period of nine years
(t=–4~+4), where t=–4~–2 represents the period
before the event; t=–1~+1 represents the period of
the event; and t = 1~4 represents the period after the
event. The most important characteristic of an event
study method is its ability to detect the presence of
abnormal performance for observations in the event
window. However, before that, normal performance
for observations during the event window should be
estimated. Following Baade and Matheson (2004) and
Coates and Humphreys (1999), a country’s economic
development also is likely to be affected by neighboring
countries’ development, global economies, and its own
recent economic performance. Therefore, estimation
of a country’s normal performance should consider
impacts both from other countries and from within its
own borders. In terms of the impact from other countries,
this study includes countries of similar economic size
in the region; that is, if these selected countries have
good economic performance, the observations’ normal
performance is estimated to be good as well. In terms
of the impact from its own economy, having considered
the growth of population and economy over the past
four years, a country’s economic performance should
be affected positively by its prior performance. Hence,
an event study method includes the following two
steps.
The first step is to estimate the parameters that are
required to acquire normal performance as represented
by Equation (2):
4
gi ,t = β 0 + β1 gi ,t + β 2 Popgi ,t + ∑ γ p gi ,t − p + ε i ,t (2)
p=1
where –
g i,t represents the mean value of the target
group to pair with respective targets and the target group
describes countries of similar economic size in the region
(see Table 2), and Popgi ,t is the population growth rate.
In addition, this study includes lagged dependent variables not only to reflect a country’s recent economic
development, but also to account for economic parameters with serial correlation. This study uses four periods
for lagged variables due to the normal business cycle that
usually takes a few years to complete, but the observations will be reduced if the cycle is set too long. The
parameters for each country (or each Olympic Games)
will be estimated. The period for estimating Equation
(2) is before t-5 to avoid the estimations of parameters
being affected by the observation period studied. The
second step is to gauge the normal performance based
on Equation (2) and then determine what is abnormal
performance based on the differences between practical
and normal performance.
Table 2 Event Study- Host Countries versus
Target Groups
Host Country1
Target Group
Australia
G72
Austria
Western Europe3
Canada
G7
China
BRIC44
France
G7
Germany
G7
Greece
Western Europe
Italy
G7
Japan
G7
Korea
East_Asian_Tigers45
Mexico
Latin America6
Norway
Western Europe
Spain
Western Europe
USA
Yugoslavia
G7
Eastern Europe7
Host countries are excluded from target groups.
The G7 includes the United States, Britain, France, Germany, Italy,
Japan and Canada.
3
Western Europe includes Austria, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, Turkey and the United Kingdom.
4
The BRIC4 include Brazil, Russia, India and China.
5
The East Asian Tigers4 include South Korea, Singapore, Hong Kong,
and Taiwan.
6
The Latin America bloc includes Argentina, Colombia and Venezuela.
7
The Eastern Europe bloc includes Albania, Bulgaria, Hungary, Poland
and Romania.
1
2
Measures
Dependent Variables
Due to the fact that the size of each host country varies,
this study calculates the growth rate or differences
between years to facilitate the cross-country study.
GDP Performance. There are a number of methods to
measure a nation’s overall economic performance. This
study measures GDP performance using the GDP growth
rate, not only because it is a popular measurement for
macroeconomic performance, but also because it represents the market value of goods and services produced by
labor and property within the borders of a nation. Hence,
this study measures economic performance by collecting
annual GDP in a natural logarithmic form and calculating
the differences between years in GDP.
Unemployment. This study measures unemployment
by calculating the differences between years in unemployment rate, because unemployment rate is measured
according to the unemployment population scaled by the
total labor force.
Economic Benefits of Mega Events 17
Investment. This study measures investment by calculating the differences between years in capital formulation deflated by the GDP. Because this measure has
been scaled, this study uses differences between years
for investments.
Independent Variables.
The Games Phase. To distinguish the Games phase
from other phases, this study uses binary dummies, where
‘1’ stands for the Games phase covering one year before
and one year after the year of the Olympic Games (t-1 to
t1), while ‘0’ stands for other years.
The Post-Games Phase. This study uses binary dum-
mies, where ‘1’ stands for the post-Games phase covering
three years, from the second to the fourth year, after the
year of the Olympic Games (t2 to t4), while ‘0’ stands
for other years.
The Pre-Games Phase. This study uses binary dum-
mies, where ‘1’ stands for the pre-Games phase covering
three years, from the second to the fourth year, before the
year of the Olympic Games (t-2 to t-4), while ‘0’ stands
for other years.
Since comparing success among various host
countries may be difficult due to factors such as the
fundamental differences in existing infrastructure, where
developing countries may need to improve infrastructures more than developed countries, and the fact that
differences in infrastructure may lead to higher costs for
developing countries to host the Olympic Games, we
control for two variables to strengthen the rigor of the
study and the explanatory power of the findings.
Population Growth. This study controls for factors
that may affect the economic impact on host countries
of the Olympic Games due to the impact of the effect of
the country of origin. Hence, we control for population
growth to conduct the analysis with rigor.
Country of Origin. This study includes country of origin
in the models to control for any significant differences
between host cities from developed countries and host
cities from developing countries in terms of any effect
on the economic performance of the selected countries.
‘1’ refers to developing nations, while ‘0’ refers to
developed nations.
Results
To better understand the data, Table 1 presents the sample
with the start/end years, descriptive statistics, and correlation tables. Due to data availability, the sample size varies
in the study of GDP performance, unemployment, and
investment. Hence, there are three tables of descriptive
statistics and correlations. Because available data for the
GDP has the longest span, it starts from 1951 and continues to 2008. For data involving unemployment and investment, the start and end years vary depending on the data
availability. As Table 1 shows, the average GDP growth
rate is 4.17% from 1951 to 2008; the average difference
is 0.06% for unemployment and –0.03% for investment,
respectively, which also signals that unemployment rates
and investment are measures after being scaled, as compared with the GDP growth rate. Three dummy variables
are used to measure the three phases (pre-Games phase,
Games phase, and post-Games phase). In the sample of
GDP, each phase spans three years, and the theoretical
size should be 5.2% (3 divided by 58). However, Table 1
indicates that the mean value is between 0.07 and 0.08,
which is higher than the theoretical size due to the fact that
some countries have hosted the Olympic Games more than
once (e.g., the United States). In the sample of unemployment and investment, the mean value during each phase is
about 9% due to the shorter span of data available. Table 1
illustrates that the population growth rate is about 1%, as
most of the data are from developed countries (73.33%).
As Table 1 also shows, multicollinearity is not a problem
in the present models (p < .05). Table 2 presents the list
of host countries and target groups in the event study.
The results of our investigation of the relationship
between the hosting of the Olympic Games and GDP
performance are shown in Table 3. In the panel regression method, the results partially support Hypothesis 1;
this finding implies that hosting the Olympic Games has
a positive impact on the GDP performance of the host
country, but that the impact is only significant in the preGames phase. This finding may further imply that hosting
the Olympic Games is such a huge undertaking that host
countries should be prepared ahead of time. Furthermore,
in comparing the summer and winter Olympic Games,
hosting the summer Olympic Games has a significant
impact on GDP performance during the pre-Games phase
(p < .01), while hosting the winter Olympic Games does
not have a significant impact on GDP performance during
the pre-Games phase. The estimated coefficient is 0.0148
for the pre-Games phase, which implies that during this
phase of all the Olympic Games (the summer and winter
Games), the GDP performance of the host countries is
1.5% higher than normal; while in the summer Olympic
Games, during the pre-Games phase, the estimated coefficient is 0.0198, which implies that the GDP performance
of countries hosting the summer Olympic Games during
the pre-Games phase can be raised even higher (by 2%).
During the Games phase and the post-Games phase,
hosting the Olympic Games does not have an impact on
GDP performance.
In the event study method, the results partially support Hypothesis 1, thus basically supporting the results
from the panel regression method; this finding implies
that hosting the Olympic Games has a significant impact
on the GDP performance of the host country before the
Olympic Games. In comparing the summer and winter
Olympic Games, hosting the summer Olympic Games
has a stronger impact on GDP performance than hosting
the winter Olympic Games. That is, for all the Games
(summer and winter), hosting has a significant impact on
the GDP performance during the third and fourth years
before the year of the Olympic Games (p < .05). Hosting
18 Tien et al.
Table 3 Cross-Sectional Time Series Regression and Event Study Results for GDP Performance
Method I: Panel Regression Model
Season
Total
Variable
Intercept
Summer
Winter
Coeff.
t
Coeff.
t
Coeff.
t
0.0594 ***
(6.38)
0.0667 ***
(6.10)
0.0566 ***
(5.09)
0.0148
(3.55)
0.0198 ***
(3.36)
0.0085
(1.67)
Pre-Games Phase
***
Games Phase
0.0033
(0.79)
0.0108
(1.80)
-0.0040
(0.79)
Post-Games Phase
0.0011
(0.24)
0.0085
(1.35)
-0.0080
(1.53)
Population Growth
0.2085
(1.42)
0.1767
(1.16)
1.0674 **
(2.23)
Country of Origin
0.0273 ***
(4.57)
0.0204 ***
(3.36)
-0.0049
(0.91)
F
4.47 ***
3.38 ***
3.70 ***
Adj. R2
23.05%
22.34%
28.39%
870
580
464
N
Method II: Event Study Model
Season
Total
Summer
Winter
t
N
Mean
T
N
Mean
t
N
Mean
t
-4
21
0.0140 **
(2.54)
10
0.0086
(1.79)
11
0.0190
(1.97)
-3
21
0.0189 ***
(3.98)
10
0.0216 ***
(4.19)
11
0.0165
(2.07)
-2
21
0.0126
(1.87)
10
0.0202 **
(2.66)
11
0.0057
(0.53)
-1
21
0.0003
(0.03)
10
0.0195 **
(2.49)
11
-0.0171
(1.12)
0
21
-0.0014
(0.14)
10
0.0108
(2.21)
11
-0.0125
(0.68)
1
20
-0.0042
(0.60)
9
0.0037
(0.87)
11
-0.0106
(0.87)
2
20
-0.0025
(0.27)
9
0.0118
(1.28)
11
-0.0141
(0.90)
3
19
0.0028
(0.25)
9
0.0096
(1.12)
10
-0.0033
(0.16)
4
19
-0.0109
(1.01)
9
0.0043
(0.38)
10
-0.0246
(1.42)
** p < .05 *** p < .01
the summer Olympic Games has a significant impact
on GDP performance during the first three years before
the year of the Olympic Games (p < .05; similar to the
panel regression results, in the third and second years
before the year of the Olympic Games, GDP growth is
higher than normal, by 2.1% and 2%, respectively), but
no impact on GDP performance during and after the year
of the Olympic Games (p < .05), which explains why,
during the Games phase of the summer Olympic Games
in the panel regression method, no significant impact on
GDP performance is shown. Hosting the winter Olympic
Games does not have an impact on GDP performance.
Overall, based on the findings from both methods, the
results from Table 3 partially support Hypothesis 1, which
implies that hosting the Olympic Games has a very weak
and limited impact on GDP performance, only producing a significant impact on GDP performance for some
periods before the Olympic Games.
The results of our investigation of the relationship
between the hosting of the Olympic Games and unemployment are shown in Table 4. In the first method, the
results partially support Hypothesis 2; this finding implies
that hosting the Olympic Games has a weak impact on
unemployment, an impact which is only found to be
significant in the pre-Games phase regardless of whether
we are dealing with the summer or winter Games. The
estimated coefficient is –0.003 for the pre-Games phase;
in the summer Olympic Games, during the pre-Games
phase, the estimated coefficient is –0.0031, and in the
winter Olympic Games, during the pre-Games phase,
the estimated coefficient is –0.0030. The results imply
that the unemployment rate is reduced annually by 0.3%
on average. That is, suppose that the unemployment rate
is 5%, then three jobs will be created annually for 50
unemployed workers (per 1000 in the labor force) during
the pre-Games phase.
Economic Benefits of Mega Events 19
Table 4 Cross-Sectional Time Series Regression and Event Study Results for Unemployment
Method I: Panel Regression Model
Season
Total
Summer
Winter
Variable
Coeff.
T
Coeff.
T
Coeff.
t
Intercept
-0.0102 **
(2.41)
-0.0097 **
(2.07)
-0.0047
(1.01)
Pre-Games Phase
-0.0030 ***
(2.87)
-0.0031 **
(2.05)
-0.0030 **
(2.32)
Games Phase
0.0001
(0.08)
0.0002
(0.13)
0.0007
(0.57)
Post-Games Phase
-0.0015
(1.37)
-0.0020
(1.27)
-0.0010
(0.78)
Population Growth
-0.0314
(0.87)
-0.0367
(0.91)
0.0126
(0.08)
Country of Origin
0.0022
(1.19)
0.0022
(1.07)
0.0081 ***
(4.48)
F
3.57 ***
2.71 ***
3.13 ***
Adj. R2
23.96%
21.46%
30.31%
613
440
334
N
Method II: Event Study Model
Season
Total
Summer
Winter
t
N
Mean
t
N
Mean
t
N
Mean
t
-4
16
-0.0063 **
(2.92)
8
-0.0086 **
(2.47)
8
-0.0040
(1.59)
-3
16
-0.0049
(1.98)
8
-0.0093 **
(3.16)
8
-0.0006
(0.18)
-2
16
-0.0030
(1.07)
8
-0.0062
(1.87)
8
0.0002
(0.04)
-1
16
-0.0039
(1.71)
8
-0.0085 **
(3.00)
8
0.0007
(0.22)
0
15
-0.0021
(0.69)
7
-0.0053
(1.00)
8
0.0007
(0.22)
1
15
-0.0010
(0.37)
7
-0.0033
(0.63)
8
0.0009
(0.32)
2
15
-0.0020
(0.85)
7
-0.0068
(1.78)
8
0.0022
(1.05)
3
14
-0.0057
(1.62)
7
-0.0067
(1.58)
7
-0.0046
(1.63)
4
14
-0.0068
(1.56)
7
-0.0075
(1.42)
7
-0.0061
(1.39)
** p < .05 *** p < .01
Similar results are achieved with the event study
method, the results of which partially support Hypothesis 2; this finding also implies that hosting the Olympic
Games has a weak impact on unemployment. For the
sample including all the Olympic Games (the summer
and winter Games), hosting has a significant impact on
unemployment only in the fourth year before the year of
the Olympic Games (p < .05), when the unemployment
rate is 0.63% lower than normal. For the sample only
including the summer Games, hosting has a significant
impact on unemployment only in the first, third, and
fourth years before the year of the Olympic Games (p
< .05), when the reduction in unemployment rates for
these years ranges from 0.85% to 0.93%, compared with
normal. For the sample only including the winter Games,
hosting the winter Games does not have a significant
impact on unemployment. Hence, based on the findings
using both methods, hosting the Olympic Games has a
weak and limited impact on unemployment.
The results of our investigation of the relationship
between hosting the Olympic Games and investment are
shown in Table 5. In the first method, the results support
Hypothesis 3; this finding implies that hosting the Olympic Games does not have any impact on the performance
of investment, regardless of whether they are summer or
winter Games. In the second method, the results partially
support Hypothesis 3; this finding implies that hosting the
Olympic Games has a weak impact on attracting investment to the host country: For all of the summer and winter
Games, hosting has a significant impact only in the third
year before the year of the Olympic Games, when the
investment is higher than normal by 0.84% of the GDP.
The results are consistent with the finding from testing
the summer Olympic Games only (p < .05), when the
investment is increased by 1.2% of the GDP, compared
with normal. Hosting the winter Olympic Games does
not have any significant impact on investment. Hence,
based on the findings from both methods, hosting the
20 Tien et al.
Table 5 Cross-Sectional Time Series Regression and Event Study Results for Investment
Method I: Panel Regression Model
Season
Total
Summer
Winter
Variable
Coeff.
t
Coeff.
t
Coeff.
t
Intercept
0.0118
(0.80)
0.0084
(0.48)
0.0052
(0.60)
Pre-Games Phase
0.0019
(0.34)
0.0021
(0.24)
0.0029
(0.90)
Games Phase
-0.0021
(0.38)
-0.0033
(0.39)
-0.0030
(0.94)
Post-Games Phase
0.0022
(0.38)
0.0056
(0.66)
-0.0010
(0.29)
Population Growth
0.0660
(0.36)
0.0594
(0.28)
0.1570
(0.38)
Country of Origin
0.0018
(0.09)
0.0029
(0.32)
0.0007
(0.05)
F
Adj. R2
1.06
0.85
2.04 ***
11.08%
11.64%
32.03%
602
440
300
N
Method II: Event Study Model
Season
Total
Summer
Winter
t
N
Mean
T
N
Mean
T
N
Mean
t
-4
14
0.0013
(0.28)
7
-0.0001
(0.01)
7
0.0026
(0.34)
-3
14
0.0084 **
(2.78)
7
0.0120 **
(3.47)
7
0.0048
(0.99)
-2
14
0.0053
(1.35)
7
0.0042
(0.67)
7
0.0065
(1.23)
-1
14
0.0030
(0.80)
7
0.0046
(0.76)
7
0.0014
(0.29)
0
13
-0.0017
(0.31)
6
0.0017
(0.17)
7
-0.0045
(0.81)
1
13
-0.0049
(0.61)
6
-0.0083
(0.50)
7
-0.0019
(0.35)
2
12
0.0008
(0.11)
6
0.0091
(0.61)
6
-0.0074
(1.73)
3
12
0.0073
(0.98)
6
0.0112
(0.80)
6
0.0034
(0.54)
4
11
0.0031
(0.67)
5
0.0080
(1.08)
6
-0.0011
(0.19)
** p < .05 *** p < .01
Olympic Games has a very weak and limited impact on
attracting investment.
According to the information in Table 3 to Table
5, the economic impact of hosting the Olympic Games
on the host countries is very limited, but significant in
some parameters, such as GDP growth and unemployment during the pre-Games phase. The possible explanations for this are twofold.1 First, the results represent
the phase when facilities and infrastructure are being
built. Since a great deal of investment goes into building and maintaining facilities and infrastructure which
need to be completed before the Games, host countries
also enjoy the economic benefit from these investments
in the cities/regions hosting the Games during this time
period. Second, the International Olympic Committee
(IOC) tends to award the Games to countries with good
economic prospects in the future to ensure that these
countries are financially secure and stable enough to
host the Games. For example, the 2008 summer Olympic
Games were awarded to China in 2001; the 2014 Olympic
Winter Games were awarded to Russia in 2007, and the
2016 summer Olympic Games were awarded to Brazil
in 2009. These host countries are members of the BRIC11
bloc, which brings together four of the world’s largest
emerging economies and could become a much larger
force in the global economy within the next 50 years
(Wilson & Purushothaman, 2003). However, the decision
making, actual evaluation, and bidding process in the IOC
can be more complex and multifaceted and may require
insights from multiple perspectives.
Conclusions and Implications
Is it worth hosting mega events such as the Olympic
Games? The answers to this research question may
involve both strategic and economic perspectives. The
present study attempts to deliberate on this research
Economic Benefits of Mega Events 21
question from the economic perspective of whether
hosting the Olympic Games has relevance to key economic performance. Based on the two methods used,
the findings reveal weak support for the hypotheses
involving an impact on GDP performance, unemployment, and investments. The economic impact of hosting
the Olympic Games on host countries is significant only
on a short-term basis in some parameters (i.e., GDP performance and unemployment in the pre-Games phase).
Since some short-term phenomena may be subject to
economic momentum, this study conducted tests across
three Games phases from long-term perspectives in a
longitudinal manner. Contrary to conventional wisdom,
hosting the Olympic Games does not seem to be a significant tool for achieving major economic objectives and
generating long-term profound impacts for the cities that
stage the events (Mihalik & Cummings, 1995; Mihalik
& Simonette, 1998; Roche, 1994), although some shortterm impacts may be significant.
The findings further highlight concerns over uncertainty due to high costs and risks arising from the hosting
of mega events (Burton, 2003; Preuss, 2000). However,
some countries have hosted the Olympic Games more
than twice (e.g., the United States has hosted eight times
including summer and winter Games), while others may
have submitted bids, but never won (e.g., Bulgaria and
Argentina). The motivations behind these efforts should
transcend economic concerns. Strategic objectives should
be considered at least as important as economic objectives. In fact, “economizing and strategizing are not
mutually exclusive” (Williamson, 1991, p. 76); however,
in economic organizations, “a strategizing effort will
rarely prevail if a program is burdened by significant cost
excess in production, distribution, or organizations” (p.
75). From this viewpoint, some may argue about whether
decision making in related governmental agencies is a
rational process. Nevertheless, for the main objective
of this study, the evidence is too weak to conclude that
hosting the Olympic Games has a long-term economic
impact on the host countries.
We may now ask: Is the economic benefit of hosting mega events a myth or a reality? On the basis of the
evidence presented in this study, it is a myth. The present study draws the conclusion that countries wishing
to bid for a mega event should consider both economic
and strategic objectives to maximize the overall possible
value from the event, although the economic impact may
be short-term and uncertain, while the strategic impact
may not be easy to quantify.
Limitations and Directions for
Future Research
Our study has some limitations. First, a mega event can
potentially generate significant economic impacts at a
local, regional, or national level (e.g., at the regional level
in a large economy, such as the United States, and at the
national level in a smaller economy, such as Greece). The
present study focuses on economic data at the national
level, which may constrain the explanatory validity in a
large economy, such as the United States. To reduce such
limitations, we control for some country-level variables
to mitigate constraints.
Second, financing sources may vary among host
countries. Some may rely more on public funds (e.g.,
Montréal 1976 and Munich 1972), while others may rely
more on private funds (e.g., Los Angeles 1984 and Atlanta
1996; Preuss, 2004). Due to data availability, this study
does not include the variable of funding source; however,
we recognize that it would be helpful to include any possible impact from different financing or funding sources
on the economic performance of a nation that hosts the
Olympic Games.
Third, the current study may suffer from the overconcentration of some data on developed countries due to
the fact that the Olympic Games have been hosted mostly
by developed countries (approximately 75% and 95% of
the summer Olympic Games and winter Olympic Games,
respectively, were hosted by developed countries). This
fact may limit the explanatory power of the findings,
particularly for developing countries in pursuit of the
Olympic dream.
Last, but not least, although some press reports on
recent post-Olympic Games have been released from
various perspectives, this study includes the 2006 Turin
Olympic Winter Games and the 2008 Beijing Olympic
Games with incomplete data in the tested Games phases
due to the required length of data collection and analysis
for the current study. However, no difference in results is
observed whether the 2006 Turin Olympic Winter Games
and the 2008 Beijing Olympic Games are included.
Notes
1.The authors would like to thank an anonymous
referee for these suggestions.
2.This acronym, BRIC, was first coined by Jim O’Neill
of Goldman Sachs in 2001, and represents the fastgrowing economics of Brazil, Russia, India, and
China.
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Appendix 1 Summer Games (in the sample)
Appendix 2 Winter Games (in the sample)
Games of Olympiad
Olympic Winter Games
Year
Games
Host City
Country
Year
Games
Host City
Country
1964
XVIII
Tokyo
Japan
1964
IX
Innsbruck
Austria
1968
XIX
Mexico City
Mexico
1968
X
Grenoble
France
1972
XX
Munich
Germany
1972
XI
Sapporo
Japan
1976
XXI
Montréal
Canada
1976
XII
Innsbruck
Austria
1980
XXII
Moscow
Russia
1980
XIII
Lake Placid
United States
1984
XXIII
Los Angeles
United States
1980
XIV
Sarajevo
Yugoslavia
1988
XXIV
Seoul
South Korea
1988
XV
Calgary
Canada
1992
XXV
Barcelona
Spain
1992
XVI
Albertville
France
1996
XXVI
Atlanta
United States
1994
XVII
Lillehammer
Norway
2000
XXVII
Sydney
Australia
1998
XVIII
Nagano
Japan
2004
XXVIII
Athens
Greece
2002
XVIV
Salt Lake City
United States
2008
XXVIV
Beijing
China
2006
XVV
Turin
Italy
Sources: the official website of the Olympic Movement: www.olympic.org
Sources: the official website of the Olympic Movement: www.olympic.org