11 June 2010

Is the World Cup Half Full or Half Empty?

Being born in South Africa I had to find a reason to get a cheesy picture of the World Cup into the blog.

It's fascinating to see how much stuff has been written about World Cups and economic development. It seems to fall into two camps:

1. What are the economic determinants of World Cup success?

2. What are the economic returns to hosting a World Cup?

On the determinants, some very serious econometrics have been dedicated to this issue (see this one from the International Association of Sports Economists!). Population seems to matter more than GDP/capita and past performance in Cups seems to matter more than the proportion of professional footballers in the population. Being the host country is important for success. Goldman Sachs also get in on the act with their World Cup and Economics Report--they find little correlation between a country's 2009 Growth Environment Score (GES) and FIFA football rankings although improvements in the GES are correlated with improvements in the FIFA rankings. Their picks for the semi finals? England, Argentina, Spain and Brazil.

More important, what are the economic returns? This is more serious but very difficult territory. What has been the infrastructure addition? Is it multi-use? Was it geared towards labour intensive job creation? What has been the increase in tourism? Have football tourists spent more than non-football tourists? What have been the spillovers in terms of kickstarting sport, tourism, and opening up the country to new investments? The evidence is all over the place (where are those systematic reviews when you need them?).

For a country like South Africa, with unemployment rates of about one third, this is no joke. We know that public works projects can have very different impacts on poverty depending on how they are designed (some work I was involved in in the late 90s showed that for 100 public works projects in Western Cape, the ones led by communities were the most cost efficient at transferring resources to the poorest), so it will be interesting to see how many jobs were created and if the differences at the 10 stadium sites and economic hinterlands can be explained by process, institutional and infrastructure design features.

However the most interesting paper I found from a quick look argues that it is the non-economic impacts, especially the internal "psychic income" (estimated using contingent valuation technique) that really matter when economic communities invest in large sports events. Civic pride, identity and a sense of belonging really seem to matter.

But the economists always seem to win out when it comes to these kinds of valuations, and I had to smile when, at the end of a long serious paper on the impacts of the 2006 World Cup in Germany,Wolfgang Maennig states " To end on a positive note, mention must be made of a reported increase in the birth rate nine months after the soccer World Cup – anecdotal, although not yet statistically confirmed. The World Cup is seen as the cause, because many people in Germany were led by the relaxed, happy atmosphere of the World Cup to forget their cares and stresses … In view of the low birth rate in Germany, this could be not only one of
the finest, but also one of the economically most long-term effects of the 2006 World Cup."

I hope you enjoy the tournament and the positive image of Africa that it will surely present.

My pick: Spain. Any team that cannot find a regular place for Cesc Fabregas must be seriously good.


Henry Rowsell said...

Some interesting articles. In addition to those cited, quite a few South African development journals have articles focussing on the FIFA World Cup South Africa 2010 , available from the British Library for Development Studies , BLDS, which may also be of interest, several looking at the urban development legacy of hosting the event.

Clare Gorman said...

For more world cup and development related economics, take a look at Laura Bolton's excellent blog on whether qualifying for the world cup could be used as a development indicator.