Boston's Olympic Bid: Leveraging the Non-Economic Gains

Author: Stuart Russell

Earlier this year, the United States Olympic Committee (USOC) named Boston as its candidate city for the 2024 Summer Olympic Games. Boston was chosen over other bids from Los Angeles, San Francisco, and Washington, D.C. It now joins Rome and Hamburg as the only cities to have officially submitted a bid for the 2024 Summer Games, although many other countries ranging from France to South Africa are also considering submitting cities. While the International Olympic Committee won’t select a host until 2017, supporters and critics of Boston’s candidacy have already made their voices heard. Newly elected Massachusetts Governor Charlie Baker hailed the selection of Boston as “an exciting opportunity to promote Massachusetts on the world stage.” However, critics like the group No Boston Olympics were more skeptical. Christopher Dempsey, the co-chair of the advocacy organization, told The Boston Globe that he was worried the city would now focus on the Olympics for the next two years instead of more important priorities like health care, education, and infrastructure.

The arguments of those opposing the candidacy are supported by the findings of a number of economists. The existing literature on sports mega-events like the Olympics, the FIFA World Cup, or the European soccer championships suggests there are relatively few positive economic benefits for the host city or country. Academics such as Rob Baade and Wolfgang Maennig contend that spending by locals during such events merely replaces spending those locals would do on different leisure activities or consumption goods. This sort of substitution effect limits the true additional spending that the events add to an economy. Other economists worry about the expensive and poorly-used sports infrastructure that often accompanies mega-events. Velodromes and archery stadiums, arenas which are filled during the Summer Olympics, are rarely used after the event. In light of such skepticism, why are these sporting events still so desirable? Why did San Francisco, Los Angeles, and Washington, D.C. battle Boston for the USOC’s nomination? Other academics suggest there could be less direct – but nonetheless still positive effects – of hosting mega-events.

In their article “The Olympic Effect,” Andrew K. Rose and Mark M. Spiegel propose one interesting impact. Rose and Spiegel argue that hosting mega-events, such as the Olympic Games may foster trade among countries. They demonstrate that countries with cities that have hosted the Summer Olympics benefit from an economically large and statistically significant increase in trade. In fact, they find that hosting the Summer Games is associated with a permanent 36% increase in exports following the event.¹ Interestingly, they also find that the imports of host countries increase in addition to their exports. The findings suggest that the Winter Olympics don’t have the same export effect, a logical conclusion given that the Winter Games are hosted in smaller cities and attract less international attention. Hosting the World Cup, however, does have a very similar effect in both size and significance.

Perhaps the most interesting insight of the study is the finding that the increase in openness and trade extends to countries with unsuccessful bids for the Olympics. Simply bidding for the event brings the same trade benefit as hosting the event itself. Rose and Spiegel conclude that “bidding to host an international mega-event such as the Olympics is part of a costly strategy that signals trade liberalization and results in increased openness.”² Even in light of uncertain direct economic benefits, politicians may still submit their city as a candidate for the Olympics with the hope of signaling to potential investors and business partners their intention to become more open to international trade.

Simon Kuper and Stefan Szymanski offer another thought-provoking argument in favor of hosting a mega-event like the Olympics. In their book Soccernomics, Kuper and Szymanski write that mega-events are desirable not for their economic appeal, but for the effect that they have on national happiness. They draw upon research that Szymanski conducted with Georgios Kavetos using European Commission survey data on happiness between 1974 and 2004.³ The researchers checked the happiness data’s correlation with eight major sporting events hosted in different European countries (the 1990 and 1998 World Cups and the 1980, 1984, 1988, 1996, and 2000 European championships). Interestingly, happiness in a given country wasn’t correlated with whether or not that country’s national team performed well. Instead, Szymanski and Kavetos observed a significant increase in happiness in a country after it hosted a mega-event. Happiness gains following the World Cup were robust, lasting two or three years after the event. Gains following the European championships were more fleeting, lasting only a year after they were finished. The increases in happiness that Kuper and Szymanski report are large. They compare the increase to “an unexpected increase in income that takes someone from the bottom half of the income distribution to the middle half.”⁴

The arguments above suggest that there might be more to hosting mega-events than direct economic gains. These benefits might be indirect in the sense that they are mediated by non-monetary outcomes. In fact, as Kuper and Szymanski suggest, the impacts might be entirely intangible in nature. Countries considering hosting these events should therefore be mindful of a wider array of potential benefits. The 2012 Summer Olympics in London are a good example of a mega-event that adopted this broader mindset. Part of London’s strategy focused on the legacy of the games with respect to four areas. Two of them, economic growth and East London regeneration, are related to traditional goals of hosting events. The other two, sports engagement and community engagement, are often overlooked by governments that usually focus on physical infrastructure and retail sales. Focusing their strategy on these four areas, London attempted to leverage the impact of the Olympics as much as possible. They created a number of innovative programs based on themes like sustainability, disability, equality, inclusion, and diversity. For instance, one creative program launched a business directory for firms that won sporting events contracts in order to allow these firms to secure more events-related business around the world. Another example is a program that offered volunteers who worked in the Games the opportunity to receive training as community organizers, as well as a fund for English youngsters to run their own volunteering projects inspired by the Olympics. While the precise impact of these programs is still being evaluated, the broader mindset that the London organizers used is potentially a very important strategy for future mega-events.

Although hosting a mega-event remains a controversial topic, some important impacts of hosting are often overlooked and left out of the public dialogue. Moreover, ensuring that the event has a successful, long-lasting legacy could hinge on the capability of policymakers to craft creative programs that effectively capture these impacts. Officials should therefore think beyond first-order, highly visible outcomes. Accordingly, if it is selected by the IOC, Boston should seek to identify a range of positive impacts associated with hosting the Summer Games. The city could utilize the region’s considerable human capital and innovation capacity to develop policies that subsequently leverage these benefits. The research we are conducting hopes to shed further light on these potential impacts and how to best take advantage of them.

This research is part of an ongoing collaboration with the International Centre for Sport Security (ICSS). This blog highlights some of the findings of this work.