UT Expert: Olympic Infrastructure Investments, Not Venues, Bring Economic Growth
Source Newsroom: University of Tennessee
Newswise — KNOXVILLE—All eyes turn to Sochi, Russia, for the 2014 Winter Olympics this week as athletes compete to take the gold. But what happens to the city and sporting facilities that have been built for the event once everyone returns home?
It's a question Scott Holladay, an assistant professor of economics at the University of Tennessee, Knoxville, has considered. He's studied the overall impact of the Olympics on a host city's long-term growth.
Host cities typically invest more than $10 billion to prepare for the Olympics, which they say brings exposure, improves international trade and increases economic growth. Holladay co-authored a paper that showed those claims are lacking. He compared Olympic host cities to bid cities that did not win. The results, published in Economic Inquiry, show little difference between the long-term economic growth of the host city compared to the bid cities.
"The ingredient that could make it successful is if a city invests in infrastructure as opposed to sporting centers," Holladay said. "That's the kind of thing that will benefit your citizens rather than sporting centers that will go unused after the games."
Tales abound of host cities that have built architectural marvels for the Olympic Games only to have them unused and falling into decay years after the games.
Holladay, whose research area includes environmental economics, cited Atlanta as an example of a city that continues to reap some of the benefits, almost two decades after hosting the games. When the city prepared for the 1996 Olympics, it invested money in improving the airport, expanded Interstates 75 and 85, and upgraded the MARTA railway system.
"These investments are still paying off," Holladay said, because Atlanta residents are still using them.
Georg Schaur, a UT associate professor of economics who researches international trade and economics education, examined the impact of a similar mega sporting event—the World Cup. He found that countries that experience success at the World Cup gain visibility and see an increase in exports.
Holladay and Schaur said that hosting the Olympics may not necessarily increase a city's economic standing. But it could improve the quality of life for residents if cities find other ways to use the venues.
Long-term investment in infrastructure could make cities more attractive to businesses, Holladay said. "But it takes a while for these effects to show up."
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