The economic impact of the Olympics

The 2024 Olympic Games are set to begin on July 26 in Paris. As the world gears up to watch their compatriots compete for gold, it may seem like France has already had one big win: landing the games themselves.

But just how Paris benefits financially from the games remains to be seen, according to rising fourth-year Silas Ruth, an economics major from Rochester, New York. Ruth, a member of Penn’s track and field team, has been examining sports mega-events through an economic lens, most recently in his paper “Medals, Money, and Legacy: A Comparative Analysis of Sports Tourism and Economic Development Through Olympic Games.” What his research has revealed has been a bit of a surprise.

“I’ve found that sports mega-events, although they have been long heralded as a tool for national development in sports tourism, international trade, and international prestige, are frequently a not very good economic investment,” Ruth says.

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Ruth first became interested in looking at the intersection of sports and economics during a freshman seminar class he took with professor Heather Sharkey. It was a Middle Eastern Studies class, and each student was assigned a different nation and asked to write a research paper on it. Ruth was assigned Qatar.

“As a lifelong soccer fan, the World Cup was coming up in 2022, and so I thought, How better to integrate these interests in sports and economics and read a little bit about the World Cup in Qatar,” he says.

What he found was very closely related to what he’s learning more about his current project. Big sporting events often don’t pay off for the host country.

After that class, he wanted to dig deeper into why nations would bid on the games, knowing the likely economic reality, and he transitioned his focus to the Olympics in particular.

“The Olympic Games are projects where billions and billions of dollars have been invested, anywhere from $2 billion to $40 billion since 2000. I was astonished to find that almost every single one had been a net loss since Los Angeles 1984,” Ruth says.

Los Angeles was a case study for a profitable, successful sports event. The city made $5.2 billion in profit, Ruth notes, but what set that competition apart was the high quality of existing infrastructure, including transportation systems, sporting arenas, hospitality services, all of the dozens of different functions that have to come together to support the millions of sports tourists who come to a city to attend the games.

Oftentimes nations that make these bids and cities that host these sports mega-events don’t have such infrastructure, and that was especially true of Qatar in 2022. “They basically had to build everything from scratch in the middle of the desert,” Ruth says.

His research has been funded by the Kanta Marwah College Alumni Society Undergraduate Research Grant, supported by the Center for Undergraduate Research and Fellowships. The grant enabled him to travel to Los Angeles this summer to meet with city officials and conduct research for the paper.

“This project is a perfect integration of two of my greatest interests: economics and sports,” he says. “I feel incredibly grateful to have received this grant from CURF.”

Ruth says he hopes his research can provide a more holistic understanding of these events and offer a perspective on what it means financially when a country bids on such games. “Hopefully my research can create conversations around the space of federal investments and the opportunity costs of these events,” he says.

Ruth’s advisor on the paper is economics professor Guillermo L. Ordoñez.

“In formulating the project, Silas has shown initiative and creativity in identifying a contemporary lens—sustainable infrastructure development—with which to examine the impact of sport mega-events on the economies of host nations,” Ordoñez says. “He has actively engaged in the conceptualization and design of the research framework, demonstrating a keen understanding of the interdisciplinary nature of the topic.”

It’s not clear that sport events are in net beneficial or costly, Ordoñez says, pointing to cases in which they heavily revitalized the economy, like the 1992 Barcelona Olympics, 2012 London Olympics, and 2006 FIFA World Cup in Germany.

“But there are also cases in which they were very costly for local communities, like the 1976 Montreal Olympics, 2004 Athens Olympics, and 2014 Sochi Winter Olympics,” Ordoñez says. Poor planning, mismanagement, corruption, and lack of long-term vision can lead to significant economic burdens for host cities and countries. 

“Silas’ research is trying to assess these important trade-offs, which can have very beneficial or pervasive effect on local communities,” he says.

While Ruth has never been to the Olympics, he says he is looking forward to the 2026 World Cup in Philadelphia and hopes he can make it to Los Angeles for the 2028 Olympic Games.

For the upcoming Paris games, he’s particularly excited to watch the track and field events “of course, because that’s my sport, and Penn has a lot of incredible Olympians they are sending over, including one current team member that I personally know, Bella Whittaker,” he says. “I’ll be excited for her running the 4x400 relay and will be cheering her on.”

He says he’s also looking at the games with a new eye for the economics side.

“Will they be able to transition this month of excitement around sport into systems and tourism that lasts for years to come? Will they be able to build sporting leagues or youth programming in the systems they created to accommodate the games?” he asks. “The aftermath of the games will be particularly interesting for me to study.”