Hosting a Mega-Event: Is It Good or Bad for the Economy? General Equilibrium Models As a Litmus Paper Test

Abstract

Hosting mega-events has long been regarded as an opportunity for economic growth, creating long-lasting benefits and attaining international recognition. Recently, both the scientific community and the public opinion at large have turned much more skeptical about the impact of mega-events. Why is it that some events appear successful and other disasters? Why the perception of impacts has changed over time? To answer these (and other) questions, there is a need to go beyond the simple narratives and “stylized facts”, to undertake some serious scientific investigation, based on verifiable data and testable models. Despite the fact that most recent studies use the same modeling tool, namely some Computable General Equilibrium (CGE) model, results are sometimes contradictory, thereby hindering the trustiness of the economic analysis for policy guidance. In this paper, we show that results are different because assumptions are different and because the range of effects considered is different, even when the same model is employed. Furthermore, some critical hypotheses are not often clearly stated. We advocate some kind of standardization in the process of model building for the economic assessment of mega-events. Only a transparent and replicable model exercise can serve as a “litmus paper”, to ascertain whether hosting a mega-event is good or bad for an economy.