The World Cup and its Impact on Host Countries

In the run-up to each World Cup, countries seeking to host the tournament often talk about benefits to be gained. For instance, Russia claimed that this year’s World Cup will boost its economy by up to $31B over the 10-year period between 2013 and 2023 1. After all, how else do host countries – Qatar (2022) and Canada-U.S.-Mexico (2026) included – justify spending billions of dollars on infrastructure and new stadiums? Since these investments are government-financed (and coming out of taxpayers’ pockets), one theory is that it’s a politically-charged, self-promotion tactic, designed to boost national pride and rally the people in support of an event that puts the spotlight on the country 2, 4. While analyses done on previous host countries are not exact and vary based on each country’s economic state, maturity level (i.e. developed versus emerging markets) and cultural attitude toward soccer, they generally show that there’s limited direct financial gain from hosting the World Cup. However, there are other intangible sources of positive impact, such as improved wellbeing of its citizens due to better infrastructure and international perception of the host country. As such, let’s take a step back and provide a more comprehensive, impact assessment of the World Cup using the framework below:

  1. Direct Profitability (from / during the World Cup)
  • Increase in Tourism Revenue (e.g. Hotels, Attractions, Restaurants, Nightlife, etc.)
  • Increase in Expenses (e.g. stadiums, public transportation, security)

FIFA emerges as the real winner through revenues generated from broadcast rights, sponsorships and ticket sales ($4.8B in 2014 and an expected $6B in 2018) 3. On the other hand, host countries rely on increased employment and consumer spending (during the construction phase) and increased tourism (during the event) – both of which are hard to measure due to opportunity costs and crowding out effects 2.

As an example, Brazil and Russia spent $15B and $11.8B, respectively, on projects for the tournament and in doing so, created hundreds of thousands of jobs 3, 4. However, these jobs are mostly “temporary”, with many of the stadiums left unused after the event. Furthermore, it’s difficult to assess whether that money would be better spent elsewhere 2. After all, funneling public funds towards the World Cup means reducing other public services, such as training and educational programs, which may have contributed more to the country’s GDP 5, 7.

With respect to tourism, the 2014 World Cup in Brazil provided $13.2B in revenues from soccer fans who travelled to the country specifically for the event 6. However, this barely covers the costs that went into preparing for the tournament. Furthermore, it “crowds out” regular visitors who have no interest in the sport and thus, may choose not to come during that time 2, 7. As such, how much “additional” tourism dollars does the tournament really bring?

  1. Long-Term Economic Impact (after the World Cup)
  • International Perception of the host country
  • Business Alliances (potentially attract investments from foreign companies)
  • Employment

Hosting the World Cup, allows emerging countries to showcase their greatness and demonstrate that they deserve a seat at the “superpowers” table 8, 12. In addition to political benefits, there’s the anticipation of investments from business leaders 13. Research from UC-Berkeley shows that countries hosting the Olympics experience an increase in trade, which in turn translates into increased employment 10. Nevertheless, the same study also shows similar increases for countries who’ve made losing bids, which calls into question whether the outcome was ever a result of hosting the event or if simply entering the bid (and therefore signaling one’s capacity to host) is enough 10.

  1. Other
  • Overall wellbeing of its citizens due to better infrastructure and improved employment
  • Feel-good effect

Beyond stadiums, host countries also invest in public infrastructure (i.e. roads and transportation systems) that benefit citizens and lead to productivity in the long-run 9. Unfortunately, this is often overshadowed by pictures of abandoned stadiums built without a sustainable purpose in mind. Which brings up that opportunity cost question again: could the spending have yielded better results elsewhere?

Perhaps one of the most underestimated impacts of the World Cup is its feel-good effect on residents 2, 11. The host population often feel an immense sense of unity and national pride due to the prestige associated with hosting such a large, global event 8. This results in increased topics of conversation during the tournament, as well as improved wellbeing, as stories of triumph can inspire more kids to partake in the sport 5, 11.

Needless to say, there are many quantitative and qualitative factors that go into assessing the impact of the World Cup on host countries. While statistics suggest that there’s hardly any immediate economic gain from the tournament, there may be benefits that are either realized after a longer time period or are intangible. After all, for some countries, the “prestige” that comes with hosting the World Cup is priceless. In these situations, a positive perception of the country, along with improved diplomatic relations and national pride, justifies the net loss 8. One area worth exploring further is, based on the framework above, how and why do certain types of host countries benefit more than others? For instance, developed countries like the U.S. (1994) and Germany (2006), have fared better, because with good infrastructure systems and some stadiums already in place, their spending was less than those of others 5, 10. As such, it’d be interesting to find other patterns and factors that impact the success of a host country. Perhaps doing that will help countries make more informed decisions around whether or not they should host.

Sources:

1 http://www.espn.com/soccer/fifa-world-cup/story/3471440/russia-predicts-world-cup-will-have-%2431-billion-economic-impact

2 http://pitjournal.unc.edu/article/assessing-long-term-economic-impacts-world-cup-mega-sport-event

3 https://www.cnbc.com/2018/06/14/the-business-of-the-world-cup–who-makes-money-and-how-much.html

4 http://www.businessinsider.com/fifa-brazil-world-cup-revenue-2015-3

5 https://www.weforum.org/agenda/2018/06/world-cup-football-smart-investment-russia-host/

6 https://theurbantwist.com/2017/10/18/brazil-world-cup-affect-brazilian-economy/

7 https://psmag.com/economics/is-there-any-real-economic-benefit-to-hosting-a-world-cup

8 http://etd.cput.ac.za/bitstream/handle/20.500.11838/1628/208127992_visser_sd_mtech_sport_bus_2015.pdf?sequence=1&isAllowed=y

9 https://scholarworks.wmich.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=3609&context=honors_theses

10 https://www.nytimes.com/2014/08/10/magazine/does-hosting-the-olympics-actually-pay-off.html

11 https://www.researchgate.net/publication/46526400_Economic_Impacts_of_the_FIFA_Soccer_World_Cups_in_France_1998_Germany_2006_and_Outlook_for_South_Africa_2010

12 https://www.spectator.co.uk/2018/01/for-putin-the-world-cup-is-not-about-football-but-global-respect/

13 https://www.weforum.org/agenda/2017/06/what-the-gold-rush-in-chinese-football-teaches-us-about-globalization/

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