SHOULD BUDAPEST BID FOR THE OLYMPICS?

—MEASURING THE ECONOMIC IMPACTS OF LARGER SPORTING EVENTS Author(s): BRUCE L. JAFFEE Source: Society and Economy, Vol. 24, No. 3 (2002), pp. 403-408 Published by: Akadémiai Kiadó Stable URL: http://www.jstor.org/stable/41471949 . Accessed: 06/09/2013 07:46
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Theauthor describes the ecoimpact Olympics general ofeconomic nomic andthe atmajor He finds events. 21 of Economic Sciences and Public Administration. lax enforcement of drugregulations.149 on Fri. While special attention devotedto thepeople who have received bribesor have been poor enforcers (esside of the the demand less attention has been on the other side).But underlying thiscontroversy is theissue of thebusiness aspects of theOlympics and the stiff competition among sites for has been both the summerand winterOlympic games. 6 Sep 2013 07:46:38 AM All use subject to JSTOR Terms and Conditions . networks. attract crowds andbigspenders. Thepaper notes that inmany casesphysical andeven facilities.9. Budapest since ithasa rapidly diversified the inBudapest is Further. that theory impact spending patterns sporting a considerable of the in a at the time of such an event cannot be part money spent community viewed as "new that willstimulate the localeconomy. dishonesty among officials.pp. unlikely strategy long money city net economic shortandlong-term tourism. sentially placed made the cities' and other who have transaction (the supplyside): sponsors groups to win the rightof holding the Olympic Games to theircity for major efforts * An earlier at the was presented at theHonorary Doctorate version ofthispaper ceremony 1999. growing economy. 1588-9726(2002) Budapest This content downloaded from 203. INTRODUCTION The recentproblems facing the International Olympic Committee(IOC) have and possibly mainlybeen bribesto eventorganisers. A large economic ofsuch an money" impact event that it be longin duration. andbe familyrequires large oriented. Keywords: sports spending patterns.78.and 24(2002) 3. benefit. holding Olympics tobethe toattract best run into the anditsregion. strategy 1. April Budapest University © Akadémiai Kiadó.MEASURING THE ECONOMIC OF LARGER SPORTING BRUCE L. Theauthor concludes that inconsidering a major event holding sporting hasserious resource constraints andfaces risks ofincreases inpollution andcongestion.403-408 Society Economy SHOULD BUDAPEST BID FOR THE . transportation that areconstructed for events to support economics major sporting prove ill-designed development inthelonger run.JAFFEE OLYMPICS? IMPACTS EVENTS* Thearticle dealswith both thegeneral economic oflarge events andthelikely impact sporting economic ofhaving the held inBudapest.

based on findingsof several researches. the local firm'sspendingon thistypeof andEconomy 24 (2002) Society This content downloaded from 203. even tourist spendingat sporting a measureof economic impact. A centralquestion is why anyone would pay to have the Olympics in theircommunity. There is a clear public policy need to evaluate benefitsand costs forcities and otherorganisationsthatare inwhether terested in hostingsportsactivities. spendingby local residents that is associatedwiththegame or eventsubstitutes forother spendbutwas replaced by thisparticuing thatwould have occurredin thecommunity lar sportsactivity. such overwho estimate theeconomic impactsof activities. exports and entertainment and sells themto visitorsand tourists.The main reason for them being in. ing event should be countedas new money forthe community Their lodging and shopping expenses. and theygo to the sporting as a short-term recreational as to be rather than the main reason for them activity in thecity. a firmmay provide a visitingcustomerwith "free"ticketsand meals. competition of the total This exportspending.some visitorsmay have all or a portionof theirexpenses paid by a local resident. bring theyinject intothelocal community thatotherwise would have been spentelsewhere. 6 Sep 2013 07:46:38 AM All use subject to JSTOR Terms and Conditions . forexample.149 on Fri.however.JAFFEE public and. have undertaken to estimatethe economic impactsof various sportsevents and in theUnited States. would have occurredanyway.privategains. frequently vestigators statethese and thus. argue formore public and privatefundsthanare I also include some of theresultsfromstudiesthatwe and others truly justified. is forbusiness or personal reasons. to the most spending According theory. That is. eventsmustbe used cautiouslyas However. exception.For example.is typicallyonly a small fraction that is related to the event. say. THEORY The economic impacts of sportsactivitiesare generatedby new money thatis takenintoa certaincommunity because of theevent. L. In addition. locals who attendand spend moneyat sporting events do so instead of such thingsas going to a movie or a park.a major event such as the Olympics or the World Cup is certainly On the other or tourists new funds that visitors hand.1 strategies 2.indirectly. And thoughseldom do theycancel an out-of-town tripor a vacationto stayhome to enjoy local sports an activities. of the economic impactsof largersporting This paper will discuss our theory events. in a sense.Firstof all. event Budapest.In thiscase. The theoryis relativelystraightforward.78.404 В.9.The city. possibly. In most cases.Decision-makersneed to determine or not they ought to spend public fundsor invest in sports facilitiesto attract but insportsteams and sportsevents. only thedirectspendingthatis associated withthe sportdue to the event. some tourists are attracted to sporting events only as a secondary activity.

tickets. spendingdistrifrom bution.is likely to be much different busithe same amount of spending thatmightresultfromnew manufacturing services. economic costs thatat least partially any benefitsfromsportingevents.78. obviously. therewould.This is truebecause some of these visitorswho come forthe sportingevent may be othervisitorswho would have come to the city at thattime forother diverting reasons. friends.If. some of the spendingsby the visitorsis effect. calling venue can hold.butwho actuallydo not attendany of or spouses who come along theathletic activities. of course. A sold-out event ofon relatives instead of or visiting seeing.sightthe event. shopping.and the resultingeconomic impact. and This ties as lodging. the new moneyimpactis likelyto be small. be no net gain to In fact.is not necessarilynet new money. however. by being open economies. to Menna ratherthan to Budapest. Howcreatingthewell-knownmultiplier respentin the local community the leaves ever. tend community. On theotherhand.food.possibly at a different activity timeand fora different purpose. area foran extendedperiod both beforeand after to focus on in measuringneteconomic impactis new spending The key factor in the local economy thatcreates eithernew jobs or improvesexistingemployIt is imand increasedpayments.Our empiricalworkhas never founda multiplier counteract There are also. lodgingexpenses by visitorsat an athleticeventin Budapest at thattimehave no visitorspostpone their net economic impact unless some of the "non-athletic" visitorsdecided to go less busy time. but it caused a significant theevent. Not surprisingly. nesses or increasedgovernment in a community So far. In thiscase.it should be notedthattheremay be people who are drawn to Budapest because of the sporting event. even big ones like Budapest. withthe sportsfanatic.these diverted visitto another. Salt Lake skiers from move recreational did the City during away Olympics only reductionin the numberof visitorsto the the Games.entertainment. to have considerablegeographicalleakage.9.I have been focusingon directspendingsby tourists due to largersportingevents. which lowers thevalue of the multimuch above 2.These may be children.not Budapest.149 on Fri. The key negatives include environmental costs. For example. ten attracts more sportsfans thanthe event's even if theyare attracted It should also be noted thatall spendingby tourists. Clearly. mentopportunities through higherproductivity portantalso fromthis aspect to look at the compositionof spendings by these on such activitheirspendingtendsto be concentrated tourists. if hotels are normallyfullybooked in Julyin Budapest. shopping.SHOULD BUDAPEST BIDFOR THE OLYMPICS 405 would stillhave been made in the local economy. 6 Sep 2013 07:46:38 AM All use subject to JSTOR Terms and Conditions . to the site because of the sporting event. It appears thatthe 2002 WinterOlympics had this effect.but spend the time in Budapest resting. 24 (2002) andEconomy Society This content downloaded from 203. plier.empiricalstudies suggestthatmuch "athleticspending"quickly Cities.

The public consumption benefits include generalpride in the community by being associated witha the that the citygets by being associprestigiousevent. the event. These events attract large spendinggroups who spend more moneyon a varietyof productsand services foran extendedperiod of time. which are economicallyexternal.thenew.These eventshave includedindividualAmericanfootthewell-known ball matches. FINDINGS I have headed several researchteams thathave estimatedthe economic impacts of various sporting events. Indianapolis500 automobilerace. The key to the empiricalmeasurement of the economic withspectators. (3) Events thatseem to have the largesteconomic impact are those thattendto be family-oriented. reputational advantages value thatlocal ated with a major sportingevent. A cityneeds to have adequate lodgingand restaurant facilitiesof various typesand sizes in orderto benefit fromtheevent economically. 3.or two-dayevents. by actuallyattending on a team's or broadcasts radio/TV.consistingprimarily townerswho stayovernight.78.traffic jams.butquite 400 stock car race.Brickyard Pan American Games. theWorldPolice and Fire Games.or listeningto/watching wearing apparel. A week-longeventwill have a significantly larger economic impactthanseveral one. We asked eventsis to be foundin interviews impactsof sporting and why theyattended questionsabout spendinghabits. 6 Sep 2013 07:46:38 AM All use subject to JSTOR Terms and Conditions .149 on Fri. concongestion. living community. in a struction and to normal noise. disruption the day-to-day These sporting events. and the popular. leaders to supportmajor a community and its governmental and private-sector sportingevents. general findingsinclude the followingkeys to getting a large net economic benefit froma sporting event: (1) The eventshould be long. as well as the entertainment either theevent. andEconomy 24 (2002) Society This content downloaded from 203.on theotherhand.9. of out-of(2) The key is obviously to attract large crowds.L. residentsobtainfromthe sporting activity. readingabout it in the newspaperor on theWeb.and public safety.we surveyedsportsorganisationsand sponsors thatmay have independently We have spent considerable sums in the local community. also developed input-output models and econometric multechniquesto estimate and the distribution of area or Our in a tipliers spending metropolitan city. JAFFEE as sporting eventsbringcrowds. Separately.406 В.such as the World Cup or the Olympics.wherepeople were from.also have so-called public consumpbuttendto be criticalin inducing tionbenefits.

There is pressureon innomic analysis withempiricaltesting to generatelarge economic results. The Olympics. especially students.hospitality.Further.oftenmen in theirthirties who are backed by corporatesupport. 4.forthesepeople are morelikelyto staywith Mends. formajor sportsevents are oftenill-suitedto support worksthatare constructed 24 (2002) andEconomy Society This content downloaded from 203. (4) The goal is to attractbig spenders.78.and tourism ers. munity.thereis littleevidence thatthepublicityaspects of such an eventhas any long-term impacton thearea's economic development.butwith a sound methodologyit vestigators which is possible to avoid biased analyses. Those involved in transportation would generally be clear gainservices. the impact in many cases is not repeatable.Factors and resource quality are such as education. 6 Sep 2013 07:46:38 AM All use subject to JSTOR Terms and Conditions . sportsbusinesses.women tendto be more cautious.Elected officialsand civic leaders also argue forsuch funding because of theprestigeand world-widenoticetheseeventsbringto thecomit also gives these officialsincreased personal attention Unfortunately. public fundingfor major sportsevents.beforeit returns to a site. economic growththan being a site of a major more important in determining netthe physical facilitiesand even special transportation sportsevent.SHOULD BUDAPEST ВШFORTHE OLYMPICS 407 and forties. and are oftenmajor advocates for. There are certainly privateinterests are likely to gain froma major sports event.and beneficiariesof.and it may be decades .buy souvenirT-shirts. is held everyfouryears.more carefulspenders.We tendto have foundthateventsthatattract youngpeople.if ever . contracts to ticket and controlover a broad rangeof resources.especially when theyare spending someone else's money. compared area thisamountis relatively to the size of theeconomy of a major metropolitan small in percentageterms. In addition. or renovationof major sports oftenhiredby groups advocating the construction facilities.149 on Fri. who are in sharp contrastto the predictionspreparedby pre-eventconsultants. net Analyses of eventsheld undertheabove conditionshave foundsignificant economic impacts. Further. eat at theMcDonald's.forexample. However. of sportsfaIndependentempiricalevidence2suggests thatpublic financing is This finding cilities does not boost economic developmentin the community. economic stability.Men seem to be anxious to impress each other. CONCLUSIONS The study of the economic impacts of sports is one that blends standardecoand public policy.fromconstruction allocations. On theotherhand.oftenin the USD 20-30 million range. transportation. have smallereconomic impacts.9. and. at best.

Jobs. Kelley University.Well-designedpublic infrastructure in the investments.theyare increasingly focusingon the bottomline: will the net economic impact of public and privatecontributions and paymentsexceed the total costs of holdingthe event. larger.9. expanding pollution.JAFFEE a long-runeconomic developmentstrategy. paper G. 6 Sep 2013 07:46:38 AM All use subject to JSTOR Terms and Conditions . Bloomington.408 В.and congesto grow at less cost and withless disruption. or constructing specialised housif spentelseing. Roger (eds)(1997):Sports. decision-makersin reFortunately. Indiana IN 47405 U. . Washington: Brookings Institution. constraints. The Olympics would provide only a short-term boost to the economy of the city.probablycan findbetter strategies tion to its residents.Zimbalist. A citythat is growingrapidlylike Budapest witha diversified and growingeconomyand an labour faced with resource force.and security systemsare likelyto have a higherreturn where.A. centyearshave been scepticalof arguments from interests and civic boostspecial ers. Andrew andTaxes. Should Budapest bid fortheOlympics in 2008 or 2012? I doubtit.Public fundsthatmightbe spent on competingwith other cities forthe Olympics.L. NOTES 1 An excellent overview ofmany oftheissues discussed in this canbe found in Noll. . Jaffee.Siegfried. .78. and further on education and are likely to have spending training more wide-spread. Journal ofEconomic 14(3):95-114. Associate Dean. andEconomy 24 (2002) Society This content downloaded from 203. Perspectives Bruce L. John Andrew ofSports Facilities andTheir Com(2000):TheEconomics munities.S.Zimbalist. improvements tax structure. Instead. sports.putting on the Games. Policy.149 on Fri.Academics.and sustainedbenefits forBudapest. Professor ofBusiness Economics Correspondence: andPublic School ofBusiness.

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