To bid or not to bid?

In this paper, the impact of hosting the summer Olympics on the local economy is investigated by means of tourism, telecommunication infrastructure, and foreign direct investment in order to review the argumentation of European bidding committees of the former hosts Barcelona, Athens, and London. Macro-economic data on countries that have been part of the EU since 1987 are used. In addition, the Take Part survey is used to evaluate the effect of hosting the summer Olympics on sport participation. Four different econometrical models are performed: Static fixed effects, dynamic fixed effects, and bias-corrected LSDV and a logistic regression with fixed effects specification. Results show a negative net effect of hosting the summer Olympics on Tourism, possibly because of the crowding out effect in years preceding the summer Olympics. A negative relationship between hosting the summer Olympics and telecommunication infrastructure was found for the years preceding the summer Olympics. On the contrary, the effect on FDI stocks is significantly positive, in the years preceding and the years following the summer Olympics. In addition, the paper finds evidence for sport participation to be endogenous. However, there was no evidence found of a relationship between hosting the summer Olympics in London in 2012 and UK sport participation.