Moneymanagement’s Weblog

The economics of Olympics

Posted in economics by moneymanagement on August 4, 2008

It is arguable if the economy of a host country benefits from Olympics….. some data says yes.

It is widely assumed that the Olympics Games have a broad economic impact and that the Games have an unequivocally positive effect on the host country and city. More and more cities are now coming forward as Olympic bidders. The macroeconomic impact of a summer Olympic Games is assumed to be over US$5 billion. The direct impact of investment and visitation is clear if short-term. The broader image benefits would be proven in the longer term: providing a platform for a nation’s corporations to excel and providing a showcase for a city region to attract inward investors.

One way to address this question is to see if other host countries have experienced increases in GDP around Olympic years. Below is a graph of one measure of the boost to GDP that countries receive from hosting the Olympics. (Each point represents the average, over all of the host countries since 1952, rate of growth of GDP in the host country less the 12 year average for that country.)

What this graph suggests is that prior to the Olympics and during the Olympic year GDP growth is higher than average – maximising out at nearly 1.5% above average GDP in the 3rd year before the Olympics. (This number seems consistent with the estimates for Sydney – at least prior to the Olympic year.) However, the graph also suggests that growth rates are lower in the years after the Olympics, than in the years prior.

This data is only suggestive. There is a vide range of economic experiences across countries and the deviations from the mean rate of growth in the graph are most likely not statistically significant. A careful analysis of the data would take into account a wider range of economic data – both in type and in time periods – and would much more careful about the statistical inference. Anybody want to run a VAR and test for a structural break? Source: Data from IMF, Penn World Tables v5.6.

The economics of winning

From BBC we get, after crunching data from five decades of Olympics, two Harvard economists have deduced that cold countries perform better than hot ones in the winter games, and that large states produce more athletes than their smaller neighbours. (No surprise there I could have told you this without any crunching)

Number-crunching

Arguably the most interesting parts of their paper are the incidental statistical trivia thrown up by burrowing through five decades of Olympic data.

· Out of all the 241 countries in the Olympic family, fewer than half have ever won a medal of any kind at either the winter or summer games.

· Despite their success at track and field events, all African nations combined still accounted for less than 2% of the total medals haul at the Sydney Olympics.

· On average, there are 9-13 competitors for every Olympic medal awarded; the best chance of winning, however, was enjoyed in 1956-60, when there were a record low of only 6.5 athletes for each gong.

· The countries most disproportionately represented at Olympics – in terms of the number of athletes per head of population – are the Seychelles in summer, and Iceland in winter.

· Rich countries send proportionally more female competitors than poor ones: for every extra $1,000 of GDP, the average nation sends an extra two female athletes.

WSJ reports PricewaterhouseCoopers released a study that estimates China will win 88 medals during the Games this August, followed by the U.S. with 87 and Russia with 79.

Read on Update on the medal tally here https://moneymanagement.wordpress.com/wp-admin/post.php?action=edit&post=124

However, the report’s author, PWC’s London-based Head of Macroeconomics John Hawksworth, is quick to point out that China and the U.S. are “basically neck and neck” in competition for the top spot.  So we can watch out and compare if what the economist suggest makes sense or are there going to be some surprises thrown our way.

To read more about the Beijing Olympics click http://en.beijing2008.cn/

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4 Responses

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  1. Moneymanagement’s Weblog said, on August 25, 2008 at 11:23 am

    […] you will enjoy The economics of OlympicsIphone anyone?…naaahViagara for Women – do we need it?Bank Deposits score over Postal DepositsSome […]

  2. RiYo said, on March 13, 2009 at 8:02 pm

    nice article!
    Read my article on the Downfall of hockey !
    http://freembastuff.com/article/INDIAN%20HOCKEY.php

  3. Gonzales said, on May 20, 2010 at 4:21 am

    When and where were you born?

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