Who Really Wins at the Olympics? Economics of the Olympic Games

As the 2014 Winter Olympics in Sochi enter their second week, the talk of who is bringing home the gold centers not just on the athletes, but also on the cities, countries and corporations who have invested in these games. In this post we’d like to focus on the economics of the Olympics, this year and in general.

It’s widely discussed that the final cost of this winter’s Olympics is expected to exceed $50 billion (though the initial estimates were nearly ten times lower), but what exactly does this cost mean? To address the various issues at play in the economics the Olympics, we’ve gathered a list of relevant articles for you to peruse.

Many people have tackled the subject of how some cities have seen certain benefits from hosting the games, while others have run up massive debt without ever glimpsing the promised ROI.

• This article from Harvard’s Kennedy School cites academic studies on the subject, offering diverse insight from a number of perspectives.
• This Economist article delves into the economics of bidding to host the Olympic games and why cities compete for this burdensome privilege.
• The author of the article on NBC online argues that no host city has ever made it into the black, but cites the exorbitant kickbacks and heightened security as the main monetary sinkholes in Sochi.
• This piece on Salon.com notes that while economics may have something to do with it, it’s the intangibles that entice a country into hosting an event like the Winter Games.
• The author of this Time online article details the difficulty of simply getting to Sochi, arguing that the hurdles fans must jump through will keep this year’s numbers low and profit marginal.
• This short article on bezinga.com notes that while an overall boost in infrastructure might not happen this year, telecommunications companies are profiting widely.

This piece in the Financial Times highlights the parallels (and lack thereof) between Beijing and Moscow in the lead up to the Olympics in each country.

In this research paper, the authors use trade models to examine boosts in national exports in cities that host mega-sports events such as the World Cup or the Olympics. They argue that its not really the event itself, but the signal that is sent that creates a lasting positive effect.

Another interesting aspect of the Olympics is the correlation between athletic performance and the economic progress of a given country. This article on Business Insider notes the shifts in podium representation by countries such as Japan, South Korea and China as each of them gained economic standing.

Photo credit: Martin Abegglen