Ley 1273 del 5 de enero de 2009

A country hosting a sporting event or participating may experience temporary effects on the happiness of the population. Kavetsos & Szymanski (2010) empirically finds causality between how well a nation performs in the competition and their happiness. If a country‟s team performs better than expected prior to the event the happiness will raise. The effect however also works to the opposite leading to a decline in temporary happiness if a team badly underperforms. The effect of hosting the event is though higher and significantly positive at a 10 % level. This positive happiness effect are found across all gender-age groups, however this is not a lasting effect and others more personal factors such as marriage are of higher significance and more persistent.

The expectations of the population are also influenced by hosting the event and by the national team performance in the tournament. For Germany it was found that the average expectation of an increase in household income of €469 for the midpoint of the median income category. This being a 23.5% increase of the income of that household category and are found to be similar for the other income categories as well (Dohmen et al., 2006). This is similar to the expectations of the South African population prior to them hosting the World Cup. Here approximately one third of the population indicated that they expected to benefit from job opportunities because of the event (Allmers & Maennig, 2010). Dohmen et al. argues that these economic expectations are of importance as they shape the economy based on the Keynesian framework. In chapter 4 under hypothesis 1 and 2 we saw that the coefficient for the host dummy is significantly positive when we control for the private and governmental investments. This can be due to these very positive expectations about the populations own economic future. If the households expect an increase in their permanent income their spending will increase leading to a short term rise in the dependent variable GDP growth. However the coefficient of 2.048 is rather high compared to what to be expected. This subject is touched upon in some literature regarding the right

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estimation method for the economic impact when hosting a major sporting event. Here it is stated that the incremental spending by the local residents should not be included as they will just increase their spending during the event and reduce their spending in the following months (Barclay, 2009).17 However if their incremental spending is caused by increased optimism and they do not reduce their spending in the following months within the same year the spending should be accounted for. The expectations can also lead to time switching of spending across years instead of just months leading to higher spending during the event year at the expense of future spending. Kim et al., (2006) analyze the expectation differences prior and after the event for South Korea in 2002.

Table 5.1 Mean before and after the World Cup in South Korea

Note: All items were assessed on a 5-point scale (1=strongly disagree, 5=strongly agree)

Source: Kim et al. (2006) p. 93

Here they found that prior to the event the expectations to positive benefits were above average and that traffic congestion, pollution and price increases to be of highest concern. All of these expectations fell to a lower level after the event indicating that both the perceived benefits and -disadvantages were lower than expected. The only factor of which the perceived benefits rose after the event was the justification of the constructions necessary to host the event. However the score of the factor was still below average meaning they found them justified but by a lower degree. These results should however be taken with caution as South Korea only hosted 9 out of the 23 teams during the event and the government imposed strict tourism rules towards the Chinese due to fear of illegal immigrant staying once the World Cup had passed (Kim et al., 2006).

17 _{This is against the argumentation in section 3.4 based on Porter (2008) in which it was argued}

that any change in behaviour from the local population should be accounted for.

Before After

Positive Impacts

Benefits of cultural exchange 3.79 3.62 Economic benefits 3.43 2.91 Natural ressource and cultural development 3.26 3.10

Ne gative impacts

Traffic congestion and pollution 3.93 3.34 Price increase 3.39 2.92 Social problems 2.81 2.11 Construction costs 2.72 2.91

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Figure 5.2 South African’s perception of the 2010 World Cup

Note: Percentage who agree with the statement

Source: FIFA South Africa Tracking 2008-2010 Waves p. 4.

For South Africa a similar decline in positive economic expectations have been found as 92% in March 2009 were found to agree with the statement of hosting the event would boost the economy and create new job opportunities. The agreement with this statement had by august 2010 declined to 75%. However the population‟s perception of the improvement of the infrastructure rose after the event finished reaching a percentage of 91. Another interesting aspect of the South Africans perception of hosting the 2010 World Cup is regarding the image they will display abroad after the hosting. The expectations had a small fall just before the start of the event in May 2010 but rose immediately after the event to a stunning 94%. In this number it is therefore possible to see to which extent the South Africans saw the event as well proceeded.

The above section therefore show why some governments are willing to invest so heavily in the World Cup as many of the non economic benefits show immediately and the economic consequences of the investments first are to be felt years later. Furthermore the economic consequences do not derive explicitly from the event why most regular households will not see and quickly after the event forget about these. By this we therefore see that the benefits of hosting a major event fit the short term time span of the politicians whose aim is to be elected once more. So what is meant by that the macroeconomic consequences do not show explicitly or immediately after the hosting of the event? For the average

0 20 40 60 80 100 The 2010 FIFA World Cup will

boost the economy and create new jobs

The 2010 FIFA World Cup will improve South Africa's infrastructure for example roads,

public transport and telecommunication The FIFA World Cup will improve South Africa's image

abroad Dec 2008 Mar 2009 Jul 2009 Dec 2009 May 2010 Aug 2010

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household will probably not remember 2 years after the hosting that the government increased the investments in the year prior to the event resulting in lower public investments following or an increased public debt. Furthermore they will probably not see the connection between the decreases in private investments due to the crowding out by the governmental investments. Neither will the thought of short term jobs be a liability to the government. By this the politicians only gain the benefits if the World Cup proceeds well and not the economic consequences. For the World Cup in Germany 2006, Panke & Rebeggiani found in 2004 that some regional culture funding was cut to support a World Cup venue instead without waking resistance. This is further elaborated in Rebeggiano (2006):

“We interpret this as a clear sign of the political importance of soccer in Europe, which remains far the most popular sport. Supporting soccer constitutes, therefore, a quite safe investment for politicians who aim to increase their popularity.”

- Rebeggiani et al 2006 p. 397 When investing in event related capital the public are less reluctant as the World Cup is an important cultural event for several soccer nations. Furthermore being elected as the host country is seen as a seal of approval of the hosting country. Rebeggiani (2006) further argues that an overinvestment in stadiums by heavy football cultural countries is less severe as they use the stadiums afterwards and would need the renovations or constructions in the future.

The authors of this thesis would therefore expect a negative economic effect for South Africa from hosting the World Cup and would thus not have recommended the hosting of such an event. However, if the aim was to improve the international perception of the nation and improve the feel good factor and economic expectations of their population, the event might be argued as successful. However the purpose, the level of investments was high and could have served the tax payers better.