The Net Effect of Giant Sports Competition on Local Economy: Evidence from Olympic Games and World Cup

Abstract

The Qatar World Cup, with a staggering investment of up to $220 billion, has been concluded for half a year. However, considering the financial returns solely from the World Cup, it falls far short of breaking even. This raises the question of whether hosting large-scale sports events is worthwhile. This study provides new evidence on the economic impact of hosting major sports events in the host country through a natural experiment. Based on data from the Olympics and World Cups held between 1991 and 2021, the experimental results indicate the following: 1. Hosting major sports events has a net positive effect on the local economy by influencing the employment rate and promoting the development of the service sector, thereby boosting GDP. 2. The hosting of major sports events can yield better economic benefits for developing countries under specific circumstances. Based on the research findings, policymakers should prioritize considering the development of infrastructure in the host country and the return period of investment costs for hosting major sports events. They should also contemplate whether the events align with the local culture and level of community participation.