Cost Benefit-Analysis of Sport Event

From our experience with economic impact studies of sport events and sport investments, we have learned that the results too often depend on political interests or on the interests of organisations that are financing the study. In spite of the warnings of economists and specialists in cost-benefit analysis, many miscalculations and misinterpretations of the economic impact can be found in these studies. It will come as no surprise that overestimation of the net benefits turns out to be the major problem. In this paper we discuss the most important conceptual errors in cost-benefit analysis of sport events and public investments in sports. On the cost side, we first deal with the possible deviations between the opportunity cost and the ‘actual’ financial cost of organising a sport event. On the benefit side, one has to separate the internal (local) and the external benefits, which implies a clear definition of the locality which is taken into account. Also with regard to the possible indirect benefits of sport events, we point out a number of pitfalls that should be evaded in calculating the net benefits. There is some evidence that the net economic benefits of sport events and sport investments are indeed rather limited, which does not exclude the existence of important positive externalities.