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The Economic Effect Of Hosting Sports Mega-Events In Developing Countries

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Hosting sports mega-events has positive impacts on various fields. First of all, Dick and Wang(2010) analyse that the Summer Olympic affects positively in terms of a Cumulative Abnormal Returns(CAR) in the stock market after the announcement day and a considerable amount of capital infusion takes place in the stock market during a year before the event. Secondly, the hosting country can take advantage of holding sports mega-events as an urban development aspect. It means sports mega-events are not only a way developing sports facilities and transportations but also of changing the urban planning designed by a local council which affects to the host city(Müller and Christopher, 2018). Lastly, Ramdas et al. (2015) identify that holding a FIFA World Cup in four countries among the seven countries has positive effects on GDP, which is a significant indicator of economic growth. It seems that statistically holding a mega sport event impacts positively on the economic growth of the host country.

On the other hand, there are negative effects on hosting sports mega-events. The stock market of the losing country, which applies for holding events but loses in the bidding process, is affected negatively. For instance, investors who bet on the losing country before the announcement day reconsider the value of their investment(Dick and Wang, 2010). Also, it is not true that all winner’s stock market has a positive signal. When the U.S.A. held the FIFA World Cup, the stock market demonstrated a negative movement(Kaplanski and Levy, 2010; Ramdas et al., 2015). That is because investors might recognise the hosting event as a bad signal. Moreover, ‘the winner’s curse’ can be caused by the gap between the actual cost and expected cost during the biding process(Maenning and Zimbalist, 2012). In other words, it will be harmful to the economic condition if they misestimate their budget. Short-term research conducted for two months, it shows a negative CAR(Cumulative Abnormal returns) trend in the five countries out of six hosted countries in the stock market. To be specific, it considered as bad news for the five countries(South Korea, France, Japan, South Africa, and Germany) that holding a FIFA World Cup in their country while the stock market in the USA had a positive CAR (Ramdas et al., 2015). In urban planning aspects, hosting mega-events can cause a displacement. Müller and Gaffney(2018, p.257) said that ‘to forced residential displacement, for example, through expropriation or forced removals, issues of population redistribution through market-mechanisms are often effects of hosting mega-events.’ Thus, hosting sports mega-events could lead to an increase in housing prices by enforcing to move local people.

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The advantages and disadvantages of holding a sports mega-event can be related to economic growth in developing countries. In terms of investment into the host country, Wan and Song (2019) point out that developing countries should be invested in more, compared to advanced countries. Maenning and Zimbalist (2012) consider that mega-events generate an inflow of capital from foreign countries to the host country as tourists visit the country and corporation sponsorship rights. Therefore, a part of the cost might be covered by additional revenue. Another fact that affects to the host country is infrastructures. The new establishments for mega-events are significantly related to other infrastructures that are connected to the facilities(Taylor, 2011). Thus, the usage of the facilities after finishing the events might be linked to their economy in a long-term view. In this context, there are potential advantages to the host countries: growing their reputation internationally, encouraging tourism, brand new event establishments, and infrastructures, reviving cities(Kasimati, 2003; Gratton, Shibli and Coleman, 2005). Normally, laborers and companies are more wealthy than before if the GDP is increasing and the inflation is stable(Callen, 2018). Accordingly, improving GDP is the most important point to developing countries and hosting the mega-event is likely to contribute to the increase through an inflow of foreign capital and developing infrastructures. Also, it should be based on well-organised plans. Taylor(2011) argues that they should plan the event more effectively to reduce negative effects and raise positive effect.

In 2010, South Africa held the FIFA World Cup successfully in the context of the team performance and showing their ablilties to hold the sports mega-events.(Plessis and Maennig, 2011). In order to explain the purpose of hosting 2010 FIFA World cup, Briedenhann(2011) quoted from Government of South Africa website(2010) that “2010 is an opportunity to speed up growth and development, to market this country and the continent to the world and an opportunity to grow local entrepreneurship.” The government of South Africa seems to take economic advantages of the event for their economic growth. Their GDP per a person is approximately $10,000 per year, a half of the population is suffer from poverty, which measured a decade before the event, and the unemployment rate is 24percent(Humphreys, 2010). Plessis and Maennig(2011) mentioned about the net tourist where the economic advantage come from in short-term view. In terms of that, they argue that tourism has limited effects on South Africa FIFA World Cup in 2010 as hunting season which is one of the factor to disturb tourists and the negative image of South Africa that is dangerous(Plessis and Maenning, 2011).

References

  1. Briedenhann, J.(2011), Economic and Tourism Expectations of the 2010 FIFA World Cup – A Resident Perspective, Journal of Sport&Tourism,16(1), pp.5-32.
  2. Callen, T.(2018), Gross Domestic Product: An Economy’s All, imf.org. Retrieved 8 September, 2019 from https://www.imf.org/external/pubs/ft/fandd/basics/gdp.htm
  3. Dick, C, D. and Wang, Q.(2010), The Economic Impact of the Olympic Games: Evidence from Stock Markets, Applied Economics Letters, 17(9), pp.861-864.
  4. Dowse, S. and Fletcher, T.(2018), Sport mega-events, the ‘non-West’ and the ethics of event hosting, Sport in Society, 21(5), pp. 741-761.
  5. Gratton, C., Shibli, S., and Coleman, R.(2005), Sport and Economic Regeneration in Cities, Urban Studies, 42(5/6), pp. 985-999.
  6. Humphreys, B, R.(2010), The Economic Legacy of The 2010 World Cup, forbes.com. Retrieved 8 September, 2019 from https://www.forbes.com/2010/06/15/world-cup-economics-south-africa-opinions-contributors-brad-humphreys.html#43c8fee3d7fa
  7. Maenning, W. and Zimbalist, A.(2012), International Handbook on the Economics of Mega Sporting Events, Cheltenham : Edward Elgar Publishing Limited.
  8. Müller, M. and Gaffney, C.(2018), Comparing the Urban Impacts of the FIFA World Cup and Olympic Games From 2010 to 2016, Journal of Sport and Social Issues, 42(4), pp. 247-269.
  9. Plessis, S. and Maennig, W.(2011), The 2010 FIFA World Cup high-frequency data economics: Effects on international tourism and awareness for South Africa, Development Southern Africa, 28(3), pp. 349-365.
  10. Ramdas, B., Gaalen, R., and Bolton, J.(2015), The announcement Impact of Hosting the FIFA World Cup on Host Country Stock Markets, Procedia Economics and Finance, 30, pp. 226-238.
  11. Rogerson, C, M.(2009), Mega-events and small enterprise development: the 2010 FIFA World Cup opportunities and challenges, Development Southern Africa, 26(3), pp. 337-352.
  12. Swart, K. and Bob, U.(2007), The Eluding Link: Toward Developing a National Sport Tourism Strategy in South Africa Beyond 2010, Politikon, 34(3), pp.373-391.
  13. Taylor, P. and Gratton, C. (2000), The Economics of Sport and Recreation, 2nd edn, London : E&F N Spon.

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The Economic Effect Of Hosting Sports Mega-Events In Developing Countries. (2022, February 24). Edubirdie. Retrieved October 3, 2022, from https://edubirdie.com/examples/the-economic-effect-of-hosting-sports-mega-events-in-developing-countries/
“The Economic Effect Of Hosting Sports Mega-Events In Developing Countries.” Edubirdie, 24 Feb. 2022, edubirdie.com/examples/the-economic-effect-of-hosting-sports-mega-events-in-developing-countries/
The Economic Effect Of Hosting Sports Mega-Events In Developing Countries. [online]. Available at: <https://edubirdie.com/examples/the-economic-effect-of-hosting-sports-mega-events-in-developing-countries/> [Accessed 3 Oct. 2022].
The Economic Effect Of Hosting Sports Mega-Events In Developing Countries [Internet]. Edubirdie. 2022 Feb 24 [cited 2022 Oct 3]. Available from: https://edubirdie.com/examples/the-economic-effect-of-hosting-sports-mega-events-in-developing-countries/
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