Monday, 14 November 2016

Public Support for Hosting the Olympic Summer Games in Germany: The CVM Approach

Pamela Wicker, German Sport University Cologne, Germany

John C. Whitehead, Appalachian State University, USA

Daniel S. Mason, University of Alberta, Canada

Bruce K. Johnson, Centre College, USA

Many scholars have asked whether Olympic Games hosts get an economic boost, and virtually all of them conclude with a resounding “No!” The new jobs and tax revenues touted by Olympic boosters invariably overstate the actual economic impact. Perhaps that’s why the people of Boston, Munich, and Hamburg have refused to bid for future Olympics in recent years. But on the days when London and Rio de Janeiro learned they would host the Summer Games, Trafalgar Square and Copacabana Beach erupted in massive celebratory parties. How can we square the different reactions in Boston, Munich, and Hamburg with those in London and Rio?

Maybe it’s because new jobs and tax revenues are not the only benefits of hosting the Olympic Games. Maybe intangible benefits, such as hometown pride and national prestige, make people feel better off even if it’s costly.

Our article attempts to answer the question by estimating the value of intangible benefits Germans would expect to enjoy if they hosted the 2024 Summer Olympic Games. In a nation-wide internet survey in late 2013 and early 2014, we asked Germans to imagine they would vote in a hypothetical referendum to raise their own taxes to finance hosting the Olympics in Germany. We asked them how likely they would be willing to vote in favor of higher taxes at seven different tax amounts from €10 to €250. We also asked a series of questions about the intangible benefits, if any, they would enjoy from hosting the Olympics.

This type of survey, borrowed from environmental economics, is known as the Contingent Valuation Method (CVM). It allows us to estimate the monetary value of intangible goods, for which no markets exist. But instead of asking about clean water or scenic vistas, we asked about the national prestige from hosting the Olympics.

In the weighted sample, 26 percent said they were willing to vote in favor of an average of €51 in higher taxes. But willingness to pay varied widely across regions. Around Cologne, Olympic supporters were willing to pay an average of €100, whereas those in Lower Saxony would only pay about €31. The wide variance in regional willingness to pay may prove useful in planning future referenda on hosting the Games. Overall aggregate willingness to pay exceeded €46 billion, far higher than the likely cost of hosting the 2024 Hamburg Olympics. 

Willingness to pay hinged upon several factors. People who regularly play sports, are happy and proud to see German athletes win, and who believe Germany’s reputation is enhanced by German sporting successes are more likely to support higher taxes. But it wasn’t all about sports. Respondents who believed referendums are an appropriate mechanism for such decisions, who think the government can effectively achieve its sports policy goals, and who think these survey results can influence government policy are also more likely to support higher taxes to host the Olympics.

If all this sounds enticing, read our article in Urban Studies. For CVM geeks, we have another reason you might be interested in the article. This paper shows that CVM doesn’t have to revolve around a one-shot dichotomous choice referendum valuation question. It turns out that is the least efficient incentive-compatible valuation question. Our article shows an example of a more efficient method, combining the referendum with a payment card and a five-point Likert scale. 

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