Olympics Has Positive Economic Impact on Both Winning - and Losing - Bidders

Hosting the Olympic games has a positive impact on a country's economy, giving a powerful boost to exports, according to academic research - but the benefits are just as strong for unsuccessful bidders.

Governments go to extraordinary lengths to secure the two-week event. However, using a statistical model, Andrew Rose of the Haas School of Business at the University of California and Mark Spiegel of the San Francisco Federal Reserve show that the 30% uplift in exports enjoyed by successful bidders is shared by countries that lose out - and they don't have to spend billions on athletics tracks and velodromes.

The authors suggest this may be because by offering to host the games, governments are sending a "costly policy signal" to the world that they are ready and open for business. Beijing won the games in 2001, just before China secured entry to the World Trade Organization; Barcelona was chosen in 1986, the year Spain joined the European Economic Community; and the Tokyo games in 1964 came at the time of Japan's entry to the International Monetary Fund.

However, with financing for some parts of the London 2012 project in crisis, the authors say that for Britain the economic benefits of holding the games are much less clear, even without the backdrop of a deep recession.

"Our model predicts that bidders for the Olympics regret actually hosting the games," Rose says. "That's one implication that seems consistent with the British data so far."