What question did this study set out to answer?

This research examines the economic impact of hosting mega-events, specifically focusing on exports and trade. It aims to identify the reasons why countries choose to host these events.

January 19, 2011

The Olympic Effect

Key Points

This research examines the economic impact of hosting mega-events, specifically focusing on exports and trade. It aims to identify the reasons why countries choose to host these events.
Formal model development to analyze economic signaling
Statistical analysis of trade data for host and bidding countries
Evaluation of the export impact of hosting mega-events
Trade increases by over 20% for countries hosting mega-events.
Unsuccessful bids for hosting also lead to significant export increases.
The Olympic effect on trade stems from signaling rather than the actual hosting of the event.

Abstract

Why should countries offer to host costly ‘mega‐events’ such as the Olympic Games? We show that hosting a mega‐event increases exports. This effect is statistically robust, permanent and large; trade is over 20% higher for host countries. Interestingly, unsuccessful bids to host the Olympics have a similar 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 an appropriate formal model and derive conditions under which liberalising countries will signal through a mega‐event bid.

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