A Fiscal View on Analyzing the Impact of Organizing Mega Sporting Events

Abstract

This paper focuses on explaining the Post Olympic Effect on mega sporting events which include the Summer Olympic Games and the FIFA World Cup. By applying the neoclassical one-sector aggregate production function model and Hansen’s threshold model (1996, 2000) to analyze the impact of organizing mega sporting events, the hypothesis of the Armey curve (1995) is investigated. Data for countries hosting the Summer Olympic Games and the FIFA World Cup over the period from 1980 to 2008 are collected. The empirical results show that 7 of 13 countries support the hypothesis of the Armey curve and the Post Olympic Effect is found to occur in France and Italy with an over-expansion in government size as far as FIFA is concerned. The effect is partially supported in Greece, Spain, and South Korea as the Summer Olympic Games are considered with an over-expansion in government size.