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This is a topic that myself and my partner are very passionate about. We noticed that in the past few World Cups, the host had been exceeding expectations and we wanted to find out if this was just a coincidence, or if there was a real connection between being the host and having a good performance. We will be doing an observational study into how being the host nation affects your performance at the World Cup. Will it make you perform better, or worse? We will take data from previous World Cups to see historically how well the host nations have done. From that data, we will then be able to make a conclusion about how much influence being the nation has on the performance of that country.

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Analysis: Pro
The statistics used in this article demonstrate how countries use numbers and statistics to determine how much something will benefit them. Here we see the comparison between how much money a country puts into vs. how much they get out. "The stadium cost an estimated $46 million to build." "The country is likely to experience at most $1 billion in increased tourism spending." In other words, countries have to weigh up the costs and benefits of hosting a World Cup before they actually make the decision on whether to host it or not. Ultimately in order to host a World Cup, the proper funding needs to be in place to get there. We can use statistics to figure out if it is worth it.

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Back in April, Russia-the host country for this year's World Cup-claimed that the tournament would generate almost $31 billion in gross domestic product growth over the next 10 years. It credited tourism, infrastructure investment, and subsequent knock-on effects from those investments as the sources of its predicted growth. That Russia made such claims isn't, on its face, surprising: In the run-up to a World Cup, host nations often boast of the rewards-both political and financial-that come with holding the tournament. In Moscow's case, that promise of riches is essential in justifying the $14 billion price tag the government picked up in order to build the necessary stadia, transport, and other infrastructure necessary for the tournament, as reported by the Moscow Times.

But these promises aren't always fulfilled. In response to the Russian government's predictions, Moody's Investor Service released a report that voiced skepticism about the supposed financial benefits. "Russia will only experience a short-lived economic benefit from hosting the 2018 FIFA World Cup tournament," the report stated. "Much of the economic impact has already been felt through infrastructure spending, and even there the impact has been limited."

In the last iteration of the tournament, held in Brazil in 2014, there were also major questions around the economic rewards for government spending. In the small working-class town of Manaus, the Arena Amazonia became a symbol of the excess and needless spending that comes along with FIFA's marquee event. The stadium cost an estimated $46 million to build, and after hosting only two matches it now sits unused. In fact, the judges overseeing an ongoing corruption case about the artificially inflated building costs of various World Cup stadia suggested that, perhaps, the structure would better serve the community by becoming a prison.

Pacific Standard reached out to a group of sports economists to discuss the real value of a World Cup to the host country, and how the Russian government arrived at its lofty economic estimates.

In general, what does holding a World Cup mean for the economy of the host country? What factors, on a country-by-country basis, could positively or negatively influence the economic impact of hosting the World Cup?
John L. Solow (economics professor, University of Iowa): Generally speaking, economists do not believe there is much lasting positive economic impact of hosting mega-events in total, although there are winners and losers. This is the result of two responses to these events that are often overlooked-substitution and crowding out. Substitution is the idea that people who spend their entertainment dollars at the event would have spent those entertainment dollars elsewhere, and so while restaurants and hotels around the event may do better business, this comes at the expense of other restaurants and hotels. And the owners and employees of those restaurants and hotels whose business declines spend less, so the multiplier effect of successive rounds of spending apply to these declines as well.

John Vrooman (sports economics professor, Vanderbilt University): Estimations of net economic impact of hosting one-time sporting mega-events like the World Cup are grossly over-exaggerated by the host country. The overall direct impact is probably zero-sum at best because of the negative congestion costs and crowding out of other economic activity.

There are also significant underlying distributional factors that falsely prioritize the political agendas of football/soccer and hospitality industries. As a result, the wildly optimistic economic spread and multiplier effects for the World Cup are clearly self-promotion schemes designed to justify something-for-nothing state subsidy of the private business of professional football.

Victor A. Matheson (economics and accounting professor, Holy Cross University): The World Cup does boost tourism; however, the boost is not necessarily very large. In South Africa [in 2010], the total increase in international visitors was only about 200,000 total during the World Cup. Even under very optimistic visitor spending estimates you might be talking about $1 billion in additional tourism revenues, which doesn't come close to covering the expenses of hosting the tournament. Infrastructure investment might pay some long-run returns, but you don't have to host a money-losing tournament to build new roads and airports, and to the extent that your infrastructure spending goes primarily toward stadiums, essentially every economic study shows that stadiums are a terrible economic investment.

Craig A. Depken II (economics professor, University of North Carolina-Charlotte): Among many host countries the net impact on tourism is relatively minor. Most host countries already have a large tourism industry and the World Cup replaces normal tourists with football tourists. There is relatively little evidence that there are long-term impacts of hosting mega-events such as the World Cup. The infrastructure spending represents an opportunity cost-spending on building [and] renovating stadiums for the World Cup could have been spent on road repair or other infrastructure. In many cases, stadiums are built with the hopes of hosting future events but such hopes are not fulfilled.

(Photo: Mario Tama/Getty Images)

It is typical for the bid proposals to include estimates of increased tourism but these forecasts are not usually built on solid statistical models of past performance in other countries using data that is freely available from, for instance, the World Tourism Organization. It does not take much effort to see that countries with the largest tourism numbers tend to be host countries and that, after hosting, host countries do not receive a noticeable increase in their already large tourism numbers.
How do discrepancies like the one between the Russian government and Moody's come about? Is the Russian government exaggerating the economic benefits for some reason? And how much does the size of the country and its existing infrastructure to host a major sporting event influence the potential economic benefits of the World Cup?
Solow: Where have I heard this before? Oh, yeah, the Sochi Winter Games were also supposed to generate regional economic development. Sochi was the most expensive Olympics ever, yet today you can easily find pictures online of the abandoned and crumbling facilities and empty hotel and vandalized apartments. The same is true for the Beijing Olympics-the fabulous Herzog and De Meuron Beijing National Stadium (the Bird's Nest) is apparently still a tourist attraction, but the rest of the facilities are abandoned and decaying.

Why do governments make these claims? I can't be sure, but generally when politicians talk I look for the special interests. Some construction companies somewhere made a lot of money building those stadiums, and their owners are often politically connected. Sell the taxpayer on the future benefits, make a lot of money on the contracts, and then when the benefits don't appear and the taxpayers are left with a white elephant of a site, well, I'm all right, I got mine.

Vrooman: The usual rule of thumb is to move the decimal point one place to the left for the self-promoting and economic estimates of the heavily politicized events like the World Cup. So the more accurate estimate would be $3.1 billion. The limitations of the Russian economy and the state of Russian domestic football both restrict the broadly distributed economic impact of the current World Cup, as much of the benefit of the tournament will head to the highly visible and economically ambitious Russian Premier League. Exaggerating the economic impact of the World-Cup mega-event is self-promotion. Playing the meta-game of political football on the World Cup pitch is a very expensive quick fix.

Matheson: The Russian government is lying. The country is likely to experience at most $1 billion in increased tourism spending. Russia is releasing these figures for purely propaganda reasons to make its autocratic leadership look good in their people's eyes. Notice that Moody's, with no reason to prop up [President Vladimir] Putin and nothing to gain from promoting phony claims, disputes the $30 billion figure.

Countries with good infrastructure stand to gain far more from the World Cup than smaller countries with underdeveloped infrastructure. For example, the United States spent a total of $5 million in stadium infrastructure improvements in 1994 to host the World Cup. Russia spent over $5 billion on stadium upgrades for 2018, Brazil spent over $3 billion, and South Africa spent about $2 billion. Qatar is reportedly spending $200 billion in their total preparations for 2022.

Depken: The $30 billion claim is not credible on the surface. Most of our academic studies in the U.S. put the net impact of a sporting event at about 10 percent of the claimed figures (whether those figures come from MLB, NFL, NBA, etc.). Using that measuring stick, this would put the impact of the World Cup at $3 billion for the Russian economy. Still seems rather high, but it is possible to construct an economic impact model that would reach such a number.

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Is There Any Real Economic Benefit to Hosting a World Cup?

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Back in April, Russia-the host country for this year's World Cup-claimed that the tournament would generate almost $31 billion in gross domestic product growth over the next 10 years. It credited tourism, infrastructure investment, and subsequent knock-on effects from those investments as the sources of its predicted growth.

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Source Evaluation: Recommendations For Source 1

One recommendation I would have for this source is to include more statistics about how being the host nation would affect the teams' performance in the competition. While the source includes a number of statistics on the economic side of hosting a World Cup, I would have liked it if they had included statistics and connected the economic side of hosting a World Cup, to the teams' performance at the World Cup. Another recommendation I would make is to include some more statistics about how having more of an economic capability to host a World Cup would affect the country's performance as the host nation. For example, if you have two host nations, one of them is more economically stable than the other, does that affect how they perform at the World Cup.

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"Among all unimportant subjects", said Pope John Paul II, "football is by far the most important".

While the former pontiff may have recognized an almost religious fervour in the beautiful game's followers, he probably didn't consult many economists before making his pronouncement. That's because the general consensus is that hosting a World Cup is not really worth the investment. Although it's tempting to accuse economists of being bad sports, most of the evidence suggests they are right.

Organizers of this summer's World Cup in Russia have predicted that the total economic impact of the tournament could be as high as $30.8 billion by 2023. The anticipated effect is created by spending on construction and general investment. Indeed, the case is often made that hosting a World Cup, or any other major sporting event, can boost a nation's economy by attracting tourists, initiating important infrastructure projects and showcasing countries and cities as good places to do business. But the costs of achieving those noble goals appear to outweigh the economic benefits they produce. Why?

Opportunity cost

The first reason is simply the opportunity cost of hosting a major sporting tournament. The money spent on new or upgraded infrastructure is likely to be more wisely used in long-term investments in critical areas of the economy. Large-scale construction is typically justified on the grounds that it will boost economic growth in the short term, and improved infrastructure will bring long-term gains to society.

Though this may be true - an increase in government spending should lead to a rise in Gross Domestic Product - the World Economic Forum's Inclusive Growth and Development Report argues that focusing on inclusive growth is more important. This means spending to deliver both economic growth and broad-based, sustained improvements to living standards.

Unfortunately, sporting infrastructure is expensive to construct and run, takes up scarce and high-value real estate, and is often difficult to use with enough frequency to cover maintenance costs. A stadium is not really essential to the economic well-being of a median worker. So if tournaments are a convenient excuse to construct and improve tangential national infrastructure, why not derive equivalent benefits at a lower cost by eliminating stadia from the equation?

Brazil's most expensive World Cup stadium is now a parking lot, and the country's preparations for the World Cup cost an estimated $11-14 billion. The National Court of Auditors of Brazil concluded that public spending on the World Cup would be "enough money to pay the entire country's annual Bolsa Familia [social welfare] bill twice over". When measured against an expected economic impact of $3-13 billion, it's hard to argue that taxpayers saw a fair return on their investment.

Changing tourism patterns

Major sporting events certainly attract thousands of sports fans. But they may disrupt established tourist flows and end up driving traffic away from popular sites and attractions. As to whether these tournaments boost overall tourist numbers, the evidence may point to the contrary.

Increasing share of revenue going to governing bodies

Advanced economies should have the edge in generating a financial surplus from competitions, given that their existing sporting, hospitality and mobility infrastructure usually requires only minor upgrades. The 1984 Olympics in Los Angeles are frequently cited as a successful and profitable competition, and the London Olympics produced $5.2 billion in revenue.

There are multiple revenue streams that exist for organizers, including gate receipts, merchandise sales, sponsorships and licensing agreements, but by far the biggest income flow comes from television rights. However, the governing bodies behind sporting events are taking an increasing share of these spoils, making it harder for even the most efficient local organizers to make money.

The Economist shows that the International Olympic Committee (IOC) now takes more than 70% of television revenue from the Games, up from 4% between 1960 and 1980. Soccer's governing body FIFA generated almost $5 billion in revenue from the 2014 World Cup, about half of which came from television rights, despite them contributing nothing to the costs of staging the tournament.

The flip side

There is even a suggestion that this might work, with one study showing that nations hosting an Olympic Games experience an increase in trade. But even countries that bid to host but lose see their trade go up, suggesting that the message they are open for business, rather than the tournament itself, is what really counts.

For Russia this summer, it's hard to work out whether its role as World Cup host is part of a nation-building strategy or simply a matter of circumstance. When the country began bidding to host this year's tournament, its capital Moscow had just hosted the Champions League final and the national team had advanced to the semi-finals of the European Championship. Could it be that President Vladimir Putin simply got caught up in the buzz?

In the end, as in football, whether you think the World Cup is worth the expense might come down to whether your heart rules over your head. As for who will win it? As former England midfielder Paul Gascoigne said: "I never predict anything and I never will".

World Economic Forum articles may be republished in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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Does hosting a World Cup make economic sense?

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It's often said that hosting a World Cup, or any other major sporting event, can boost a nation's economy by attracting tourists, initiating infrastructure projects and showcasing countries and cities as good places to do business. Does the evidence back this up?

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Source Evaluation: Recommendations For Source 2

One recommendation I would make to this source would be to have some explanation behind the statistics. The source does a great job at presenting statistics and showing how the different hosts perform based on where they are from. They are also doing a good job at how the non-host nations do based on where the host is from. These are great statistics, but I would like to see more of an explanation about why these statistics are the way they are. Another explanation I would like to see is how many times the winner of the World Cup, is the host nation. This statistic would be extremely helpful to examine how much of an effect being the host has on their performance.

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The climax of the 2014 world cup is upon us, with the final games being played, and the outcome of the competition to be decided. One of the reasons why Brazil was one of the favourites going into the world cup was because they were going to be 'at home' for all of their games. But how much of an advantage was this really?
When we looked at all world cup competitions since 1930, it shows that 6 of the 20 World Cup competitions have been won by the hosts. Bearing in mind that on 5 other occasions the hosts had no realistic chance of winning themselves, this looks like quite a strong outcome. However the countries in question could have been favourites anyway. So more investigation is required.
Across many sports the impact of home side advantage is recognised - it manifests itself in important games being played at neutral location, or having 2 legs one 'home', one 'away' to try to minimise any effect. The reasons cited are many and various (see Wikipedia article). When it comes to the 2014 Football World Cup, the effects of the weather and altitude appear to be the ones influencing player performance the most.
The strength of this effect for could be one reason why it is true that up to 2010, no team from outside of South America has ever won the title when the world cup was hosted in a South American country. It is interesting to note that with Germany being highly fancied to win the 2014 final in Brazil at the time of writing, this record could be broken.

Figure 1: World Cup Winning Continent vs. Hosting Continent

For the host nation does playing all your games 'at home' result in you progressing further than your FIFA world ranking at the start of the competition suggest?
As the host gets automatic entry into the competition this does result in teams of very variable abilities taking part, and not needing to qualify means that teams outside the top 32 getting into the tournament. This is true of non-hosts as well. The qualification phase for each world cup also results in teams progressing who are not in the top 32 and vice versa. As well as this the pools for early rounds and the consequential route to the later rounds also has an impact on whether the best teams progress. Notwithstanding all of the above, a quick analysis of all of the World Cup results from 1990-2014, where FIFA rankings are readily available, does show some interesting points.
Teams that are low in the FIFA rankings tend to over-perform when playing as host. Between 1994 and 2006, the host teams all appeared to benefit from 'home advantage'. The star performer is France, who were ranked 18 in 2002, but subsequently went on to win, with Germany coming from a ranking of 19 to finish 3 rd in 2006. The other impressive result was from South Korea, who came from a ranking of 40, and went on to come 4 th.
What about hosts who are fairly well ranked going into the finals? Well Italy in 1990 was in this situation. They were favourites, so perhaps this is due to the pressure of national expectations. Although ranked number 1 they only came 3 rd. Brazil in 2014 was ranked 3, so coming 3 rd or 4 th is pretty much in line with expectation. It's a lot harder to do better than your ranking when it is already high.

Figure 2 : FIFA Ranking vs. Final Position in Competition

The analysis shows that over the last 7 World Cups only one country (Italy) did worse that ranking would expect. However they were ranked number 1 at the start, so it was difficult to do better than that! So there does seem to be a pattern that World Cup hosts do on average benefit from home advantage, but it does help to start the competition with a low ranking. So looking forward to the next world cup, Russia are currently ranked at 19 in the world, and unlikely to rise too much above that - so from our analysis, we expect them to make it through to the quarter finals come the next world cup.

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Is there a home-side advantage at the World Cup for the host nation? by Neil Ferber and Nigel Lewis

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The climax of the 2014 world cup is upon us, with the final games being played, and the outcome of the competition to be decided. One of the reasons why Brazil was one of the favourites going into the world cup was because they were going to be 'at home' for all of their games.

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Analysis: Counter
The statistics in this article take a look at how well the host nations have performed at the World Cup. They provide data on the results and finish of each World Cup host nation. Teams often have exceeded expectations, with a few outliers. "It may surprise you to learn that only six teams have won the World Cup that were also the host nation, and they include Uruguay back in 1930, Italy in 1934 and England who were crowned champions way back in 1966." This source argues that being the host nation has not had much of an effect because they have not won the competition very often.

Source Evaluation: Recommendations For Source 3

This source does a great job showing the host nations that performed well. One thing I would recommend is that they also include some statistics about the host nations that have not performed so well. This way, the reader can get both perspectives and not just information about the hosts that did well. Another recommendation I would make is to provide explanation behind the odds they give for the upcomming host's chances at the World Cup. They provided odds about how well Russia will do at the then upcoming 2018 World Cup. I would have liked if they explaned why those odds were made like that. One last recommendation I would make to this source would be to connect the odds of each host nation's performance, to how they actually performed. This would be great to examine if their performance was actually above or below expectations.

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Is being the host nation in the World Cup a curse?

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Russia won’t be among the top nations at this summer’s FIFA World Cup, but will their chances suffer even more by having the tournament on home soil?