Difference-in-Differences Approach for Analyzing the Effects of the Olympics on the Economy of the Country

While it is assumed that hosting the Summer Olympics can positively affect the country’s economy on multiple levels, from short-term benefits of increased tourism to long-term higher prestige of the country, the empirical evidence begs to question these assumptions. Moreover, hosting Olympic Games is quite expensive for the government, so it is crucial to accurately estimate the economic effect of the Olympics. But how? To account for the heterogeneity of the data, we start with a Regression Discontinuity Design using the voting percentage at the final round of the bidding process as the running variable. However, due to the limited amount of data and the model’s high sensitivity, we opted for several Difference-in-Differences analyses for different Olympics years, using the Olympics host as the treatment unit and the Runner-up country as the control unit. After checking for the parallel trend assumptions, we examined five Olympic Games in 1976, 1988, 1996, 2004, and 2012. We found that the effect of hosting the Olympics on GDP per capita is mostly positive and ranges from -4% to 25%.

Download the dataset here: https://drive.google.com/file/d/150Iqku6xVvEEFhYZG-k831pxSRqfi3_P/view?usp=sharing