Nova workboard

a blog from young economists at Nova SBE

Hosting the Olympic games in 2022. A good idea?

Norway is in the bidding process of hosting the Olympics in 2022, and it´s now down to the government to decide if they are willing to guarantee for the costs. Statistics show that it is impossible to cover the costs of such an event based on direct income, such as tickets and media rights. Hence, it is the indirect income, such as increases in tourism, exposure of Norwegian businesses and increases in welfare that has to be sufficiently high, in order for the government to avoid a big bill. Supporters claim this is possible, while the opponents are claiming this will lead to decrease in welfare and increase in taxes.

A well-used argument for hosting the Games is that it will create infrastructure and boost the local economy. The idea is that the Games can be away of funding for instance new sports halls and roads, which will increase welfare. However, the top-down fast-track approach with strict deadlines can lead to failing being responsive to wider interests of the long-term community needs. The investment in physical infrastructure needed, may lead to that softer infrastructure issues are being neglected. Hence, there is a mismatch between the conditions required for running a successful Games and the longer term needs of the host country (After the Gold Rush). Sports facilities from the Games 1994 in Norway are standing empty, which implies planning that failed. A long-term success of the games is therefore depending heavily on better planning.

As a democracy, the government cannot take the money needed directly out of Norway´s savings. The costs have to be covered by moving available spending from other projects or (indirectly) increase taxes. Supporters of the Games claim this spending is just a way of speeding up projects that already are planned or necessary, and hence, not a real cost.

Research also shows that countries bidding for the Games tend to overestimate the value of the indirect income effects. Analysis of the ski world cup in Norway in 2011 revealed that the estimated positive effects where overvalued (Geir Gripsrud 2011), and an analysis of the Games held in Norway in 1994 revealed no effects of increased tourism, except from a small increase that year. However, there is evidence that countries that are hosting the games experience a boost in trade, as the bid implicates openness and liberalization (The Olympic Effect). An important note however is that this effect has been seen mostly in countries like China.

As the research shows, the chance of (measured) positive profits is low. Hence, the reason for hosting has to be an investment in the population´s well-being through a big public party (National well-being and sports events) and the positive effects this will create for society. The outcome of hosting is uncertain, but the majority of the Norwegian people did at least in a survey in 2011 say that they where willing to pay extra taxes in order to become the host-country (Vinter OL22). Let´s hope the Norwegian athletes will perform well.

Mari Olsen

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Author: studentnovasbe

Master student in Nova Sbe

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