The Economic and Political Impacts of Hosting a World Cup

Abstract

Mega-Sporting Events are exactly what they sound like. These events are the pinnacle of the world of sports. They provide entertainment to hundreds of millions and in some instances billions, as is the case with the FIFA World Cup. If such an event is able to attract so many eyes, especially in today’s world of vast media coverage, then surely hosting such an event will have some impact on the economy or politics of the host country. This is the research question addressed in this thesis. What political and economic impacts face World Cup host nations? The hypothesis is that due to initial steep upfront costs, there is likely a dip in political support and economic growth. However, capitalization on the international spotlight afforded by hosting the World Cup will produce both economic growth and political change after in the subsequent years following the tournament. Hosting the tournament sends a signal of openness and willingness to trade, therefore increasing confidence in potential international trade partners as well as investors. As increases in trade and foreign direct investment come to fruition, the openness associated with the economy will leak into the political landscape encouraging a shift to more open policy and an increase in democratic ideology. Previous economic and political impact studies have provided evidence to support either side of the impact argument, positive or negative. In fact, the majority of ex-post studies have expressed great concern about the overestimation of the positive economic impact results of ex-ante studies. This ex-post study of the combined World Cup hosts from 1950 to 2014 will look to find evidence supporting or undermining the hypothesis that economic growth and democratic shifts in political ideology are associated with hosting the World Cup. Datasets for both political and economic variables have been compiled through the merging of various credible data sources. Variables gathered from these datasets along with a plethora of dummy variables representing countries that have hosted, bid successfully or unsuccessfully to host, etc. combine to create the master dataset. Through regression analysis, I have attempted to find evidence to support either of the differing opinions over the true impact of hosting Mega-Sporting Events. The results express agreement with the economic portion of the hypothesis, however, the political section is unclear. This is likely due to the fact that hosting the World Cup effects politics more so on the municipal and state level than on the national level. The economic results show increases in the major economic variables assessed after a successful bid is announced and after hosting the event. This led to the conclusion that hosting a World Cup is associated with an increase in economic growth. Given this conclusion, the policy recommendations centered on minimizing costs of the tournament and maximizing returns through country negotiations with the monopolistic entity of FIFA.