Hosting mega-events like the FIFA World Cup and the Olympics often leads to increased wealth inequality. Denis Ivanov and Gaygysyz Ashyrov show that these events disproportionately benefit the wealthy, exacerbating the gap between rich and poor
The estimated cost of the 2022 FIFA World Cup in Qatar was around US $226 billion; more than ten times the cost of the 2018 event. Besides the exorbitant price, controversy, including reports of human rights abuses and lack of transparency, dogged it from the outset. Yet somebody must be benefitting from such events, but who? Our research aimed to find out.
The first graph below illustrates the increasing nominal expenditure associated with the organisation of mega-events since 1936. It also shows the inflation-adjusted costs, as of 2022. On average, costs remained below US $1 billion until the 1970s. In the 1990s, they surged to around $10 billion, and surpassed $20 billion in the 2000s. The 2022 World Cup stands out as the costliest, with a total expenditure exceeding $225 billion. Universal Expositions entail marginally lower costs, while FIFA World Cups always occupy the top end of the expenditure spectrum.
The 2022 FIFA World Cup in Qatar cost more than ten times the 2018 event in Russia
Our recent article in the European Journal of Political Economy tests the impact of sports mega-events on wealth inequality across more than 120 countries. We performed panel data analysis on a V-Dem and World Inequality Database dataset going back to 1900. Using this data, we found that hosting mega-events is associated with a widening gap in wealth, but not in income.
While mega-events provide entertainment and boost tourism, they also offer host countries fast-developing infrastructure. However, the economic benefits of such short and intense injections of capital are not the same for everyone. Our findings show that instead of helping reduce wealth inequality in host countries, hosting a mega-event exacerbates it.
The plotted coefficients of dynamic time dummies reveal that the percentage of the top wealth shares begins to increase by around 2.2% for the top 1% four to three, two, and one years before the event takes place. For the top 10%, the magnitude is almost twice as large. The contraction effect on the bottom 50% of wealth share owners, meanwhile, is around 1%. In line with the established literature on wealth inequality, we added a set of control variables, such as inflation, GDP growth, fertility rate, and the top 1% of income.
The wealth share of the bottom 50% of wealth-holders contracts in the period following the hosting of a mega-event
In contrast, the bottom 50% of wealth-holders see a contraction of their wealth share in the two to three years after the hosting of mega-events.
Total cost of mega-event organisation around the world
Moreover, it seems that the ultra-rich benefit the most from the organisation of these events. The effect is particularly marked in countries with lower institutional quality; indeed, it doubles in magnitude in non-democracies and non-OECD countries, and is higher during FIFA World Cups. Furthermore, a spillover effect persists for two to three years after a country has hosted. Even when we control for top income shares, fertility rate, GDP growth, and inflation, mega-events have since 1900 remained strong determinants of growing wealth inequality across the world.
We propose two possible explanations. First, the organisation of mega-events happens during episodes of extreme growth, when capital flows abundantly in the host country. This exacerbates the difference in the pace of growth between income and wealth, to the benefit of the wealthy and at the expense of the have-nots. Second, there may be hidden vested interests in organising events via procurement contracts, real estate, and other elements. Only the wealthiest sections of society have access to such things.
The development of infrastructure, the establishment of contracts, and the creation of new, relatively short-term jobs all represent opportunities for large capital injections. These factors could accelerate gains from capital assets and construction contracts. However, perhaps counterintuitively, they may not significantly increase income levels, because the workers involved in many of the preparatory activities tend to be employed on shorter contracts. This could lead to a widening wealth gap during the hosting of mega-events, because those with capital, rather than those who rely on income from labour, accrue the benefits disproportionately.
The big capital injections in preparatory activities for mega-events don't tend to benefit those who rely on income from labour
So, mega-events can bring temporary economic boosts and infrastructure development. But they often exacerbate wealth inequality, benefiting the wealthy at the expense of the broader population. To ensure more equitable distribution of the benefits of such events, we call for a critical re-evaluation of their planning and execution.
