Sports and Development:
An Economic Perspective on the
Impact of the 2010 World Cup
Jo Swinnen
&
Thijs Vandemoortele
Cape Town Conference March 2008
Overview
1.
2.
3.
4.
Introduction
The Impact of Infrastructure Investments
Sports, Migration & Development
Concluding Comments
1. Introduction
• Development:
•
•
•
•
Physical development (Vanden Auweele, 2006)
Social development (UN, 2006)
Development of sports infrastructure/competition
Economic development
• Focus: Economic Development
• income growth
• poverty alleviation
1. Introduction
• How important is sports in the economy ?
– Data are poor and ad hoc
• 2 million people (1.3%) employed in the sports
economy in EU-15 (Andreff & Szymanski, 2006)
• 1 to 3% of GDP is accounted for by sports
expenditures in Europe
• Currently in UK: 2% of GDP
– (3 times as high as agricultural economy … )
1. Introduction
• Leading sports teams :
– large commercial enterprises
• Value of Manchester United = 1.4 billion dollars
( ~ total annual output of Sierra Leone)
• Value of richest US football & baseball teams = 1
billion dollars
(average US football team > 0.5 billion dollars)
2. The Impact of
Infrastructure Investments
• Bids to host mega-event: increased over time
• Growing demand from emerging and developing
countries and quasi-fixed supply
• Large perceived economic benefits is a
popular argument to host a mega-event
– and to lobby for public funds
(Porter, 1999; Noll & Zimbalist 1997):
• Supported by consulting reports:
irrespective of country and event, always
large positive economic impact
(Johnson & Sack)
Academic critiques on these studies:
• Net benefits are heavily overestimated
– (Kesenne, 1999; Porter, 1999; Lee, 2001; Matheson, 2002; Szymanski,
2002; Bohlmann, 2006; Matheson 2006; Brenke & Wagner, 2006;
Madden, 2006)
• Because the studies ignore
– Substitution effects
– Crowding out effects
– Leakages
– Opportunity costs of public funds
–…
• Always prospective studies, few ex-post
• no incentives for government, consultants or
bidding company (Coates & Humphreys, 2003)
• Ex-post analyses yield much lower (if at
all) benefits. E.g.:
– Siegfried & Zimbalist (2000): review of several
studies, no significant evidence that building
sports facilities stimulates economic
development
– Baade & Dye: presence of new stadium has
uncertain impact on income, possibly even
negative (relatively to the region)
World Cup 2006 Germany
Ex-post study by Brenke & Wagner (2006)
– Predicted benefits were overestimated
– Additional employment only temporarily
– Overall economic performance boosted by
0.02% to 0.07%
– Main beneficiaries:
• FIFA (187 mio Euros)
• German Soccer Association (21 mio Euros)
World Cup 2010 South Africa
• Report of Grant Thornton (July 2003)
Predictions:
» Direct expenditure: R12.7 billion
» R21.3 billion (1.2%) increase in GDP of South Africa
» 159,000 new employment opportunities (3.5% of
South Africa’s unemployed active population)
» R7.2 billion additional tax revenue
• New report: R51.1 billion (2.7% increase in
GDP)…. because more tickets available for sale
Four Reasons for Skepticism
1. Inclusion of domestic resident’s
expenditures as direct benefits
→ merely reallocation of expenditure, does
not add to GDP (see Baade, 2006)
2. Questionable and overly optimistic use of
multipliers (Bohlmann, 2006)
3. Much higher investment costs than assumed
(International Marketing Council of South
Africa, 2008)
•
•
R8.4 billion (instead of R1.8 billion) on building and
upgrading stadiums
R9 billion (instead of R0.5 billion) on upgrades in
infrastructure
4. Interpretation of 159,000 new employment
opportunities:
•
•
•
Recruitment of volunteers by LOC
Many jobs only temporarily
Due to bad economic situation in Zimbabwe, huge
inflow of skilled and semi-skilled migrants (construction
workers)
Impacts & Level of Development
• Be careful comparing South Africa to
Germany to assess economic impact of
World Cup due to differences in
development and level of income
(Matheson & Baade, 2004)
Reasons:
1. Costs of infrastructure investments
– South Africa needs to build several new stadiums, more
than Germany
– Much higher general infrastructure requirements in
South Africa (e.g. transport capacity)
2. Differences in cost of capital and cost of
labor
– Opportunity cost of capital higher in developing
countries
– Comparatively lower wages in developing countries
– Lower labor opportunity costs because of large
unemployment
3. Post-World Cup use of stadiums
– Uncertainty about demand for football stadiums in
South Africa
– Low use and high maintenance costs may lead to a
negative ‘legacy’ of the World Cup
– Concern justified for South Korea and Japan (World
Cup 2002), low use and high costs (Watts, 2002)
4. General infrastructure investments
– Potential effects large in South Africa:
Infrastructural deficiencies = constraint to growth
– Infrastructural improvements due to World Cup could
provide a productivity boost
But … Money is not everything
– Several reports point at the intangible effects
– Szymanski (2002): no economic growth from
organizing World Cup, but improvement of overall
well being because of intangible effects (like
increased confidence and pride of local population)
– However, intangible benefits : from winning or from
organizing ?
Conclusion Brenke & Wagner (2006):
– Minor economic effects,
– but
• positive country-image for Germany
and ….
• “it was great fun, nothing more,
nothing less”
• Economic implications of intangible
effects?
– Graham et al. (2004) show that happier
people perform better and earn more income
– Relevant for World Cup in South Africa,
because Graham et al. (2004) show that this
effect matters more for the poor.
– Hence, ensuring poor local people access to
the games is important
3. Sports, Migration & Econ Dev
• Large share of migrants in main sports leagues
in Europe and North America
• (relative to average economic sector standards)
• The pattern varies considerably across sports:
• (Ice) Hockey: East Europe to US and Canada
• Baseball: Central America to US and Canada
• Basketball: Europe and Latin America to US (top)
US to Europe (below)
• Football: The rest of the world to Europe, and within Europe
• Migration of African players to Europe has
grown strongly over the past decades
250
200
150
100
50
0
92- 93- 94- 95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 0593 94 95 96 97 98 99 00 01 02 03 04 05 06
% change of total number of African players in the Belgian First Division (10% average)
Literature on migration of athletes or sports
players emphasizes negative aspects
(e.g. Andreff, 2004; Poli, 2006; Darby, Akindes and Kirwin, 2007)
1. “Muscle drain”:
– negative effects on education and competitiveness of
the local sports system
– undermines the sporting capacity of developing
countries
– explains the “poor performances of developing
countries in world sport events” (Andreff, 2004)
2. Wage dumping:
– low wages for developing country players
Literature on migration of athletes or sports players
emphasizes negative aspects
(e.g. Andreff, 2004; Poli, 2006; Darby, Akindes and Kirwin, 2007)
1. Muscle drain
2. Wage dumping
3. Modern Form of Slavery & Neo-colonialism
–
Illegal nature of migration and exploitative nature of transfers
(Modern form of slavery)
–
Football Academies = neo-colonialist structures
–
–
–
–
Cause underdevelopment
Unequal distribution of the gains
Decline in education enrolment
Creating social problems
(Darby, Akindes & Kirwin, 2007)
“… this process […] of neo-colonial
exploitation and impoverishment of the
developing world by the developed world.”
Darby, Akindes, and Kirwin, 2007, p 143
“… neo-colonialists who don’t give a damn
about heritage and culture, but engage in
social and economic rape by robbing the
developing world of its best players.”
Sepp Blatter, FIFA president
(cited in Bradley, 2003)
Sports Migration
• Summary : A very negative assessment
• Contrasts strongly with general literature
on economic effects of migration
“… international migration […]
has a strong impact
on reducing poverty.”
(Adams and Page, 2003)
Evidence ?
–
–
•
Sports literature : hardly any data, no representative
empirical evidence
General migration literature: very extensive
empirical studies
Issues :
1.
2.
3.
4.
How important is migration from Africa ?
Mechanism of migration effects
Effects on national performance
Functioning of “sport academies”
• Q: How important is African player
migration to Europe ?
• Q: How important is African player
migration to Europe ?
• A: Relatively minor compared to migration
from other regions
France
Rest of World
Central/South America
Sub-Saharan Africa
Rest of Europe
France
Germany
Rest of Europe
Sub-Saharan Africa
Central/South America
Rest of World
Germany
England
Rest of World
Rest of Europe
Scandinavia
Ireland
Rest of UK
England & Wales
Italy
Rest of Europe
Sub-Saharan Africa
Central/South America
Rest of World
Italy
Spain
Rest of Europe
Sub-Saharan Africa
Central/South America
Rest of World
Spain
Migration Effects : General
1.
2.
3.
4.
Absence
Diaspora (trade & remittances & …)
Return of migrants
Prospect of migration (dynamics)
[Kapur & McHale (2005): “Brain Drain & Brain Gain”]
Remittances : positive effect on development
–
Remittances reduce the level, depth and severity of
poverty in the developing world because of income
transfers to poor households (although not necessarily
the poorest)
•
–
(Adams & Page, 2003; 2005)
Remittances have a positive impact on investment in
education and entrepreneural activities
•
(Edwards & Ureta, 2003; Yang, 2005; McCormick and Wahba,
2001; Page, Cuecuecha, and Adams, 2008)
=> Little known about impact of remittances from sports migrants, but no
ex ante reason for difference
Remittances are important
Net Flows and Transfers of External Finance for Developing Countries, 2004
Billions of dollars
Total Remittances
Region
Private Official Remittances (net)
(net %)
Flows
Latin America & Carribean
41
2,3
29,6
72,9
41
Middle East & North Africa
4,8
1,6
13
19,4
67
South Asia
11,1
2,2
18,2
31,5
58
Sub-Saharan Africa
13,2
22,9
4,1
40,2
10
Transfers
Latin America & Carribean
Middle East & North Africa
South Asia
Sub-Saharan Africa
-11,7
-0,9
1,9
1,7
-4,3
-1,6
0,3
21,4
29,6
13
18,2
4,1
45,4
10,5
20,4
27,2
65
123
89
15
Source: Global Development Finance (2005), taken from Kapur and McHale (2005)
billions of U.S.
dollars
Net transfers
Official net
resource transfers
Net remittance
Source: Kapur and McHale (2005)
20
03
20
01
19
99
19
97
19
95
Private net
resource transfers
19
93
19
91
180
160
140
120
100
80
60
40
20
0
-20
“Muscle Drain” or “Muscle Gain” ?
• “[…] since the world at large values education,
allowing migration of the ‘best and brightest’
from a developing country may actually increase
the incentive to acquire education. … this would
encourage the average level of education of the
remaining population to rise.”
Kapur and McHale (2005): Brain Drain or Brain Gain ?
“The average level of schooling in the
migrant-sending villages increases with
internal migration.
[…]
The dynamic investment effects reverse the
static, depletion effects of migration on
schooling.”
Boucher, Stark & Taylor (2005) – Mexico
Muscle Drain or Muscle Gain ?
Empirics : very little
– Ad hoc evidence can be used both ways
– Performance of African teams with migration ?
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Average FIFA Ranking
120
100
80
60
40
20
0
Wage Dumping ?
•
Similar argument in general migration
literature.
•
However: Careful statistical analyses
yield no clear evidence either way
– (eg. despite massive immigration from
poorer countries very little impact on US
wages)
(Aydemir & Borjas, 2007)
The role & effect of Football Academies ?
Let’s take a look in one of the major player
exporting countries : Senegal …
Football Academies in Senegal
•
Source: own surveys & interviews in summer
of 2007 in Senegal
•
Two different types of “Football Academies” :
1. ‘Ecoles de Foot’ (football schools)
2. ‘Centres de Formations’ (training
centers)
Football schools
–
Importance : Nearly 300 in the region of Dakar alone
•
•
(according to FSF – Fédération Sénégalaise de Football)
Boom in the wake of Senegal’s outstanding performance at
World Cup 2002
–
Organization : One man (without education in football
training), three balls and the children from the
neighborhood on a plot of barren land
–
Academic approach: no education involved
Training Centers
(Centres de formation)
–
Importance: Five in Dakar Region
•
–
Organization:
•
•
–
(according to FSF)
More means at disposal
Professional approach
Academic approach:
•
Offers besides football training: academic education, equipment,
medical support, etc.
Training Centers
(Centres de formation)
– Diambars
(Supported by (ex-)top players in EU: Patrick Viera,
Bernard Lama, … )
– Elite Foot
– CASE
•
– …
(former Minister of Senegal)
Diambars – Official statements
•
Diambars focuses first and foremost on the education of its pupils: about 70%
of their time is dedicated to schooling.
•
Graduates from the school are sold to clubs, but not before they turn 18, and
their "transfer fees" are reinvested in the school, and in funding the roll-out of
academies across Africa.
•
Ensuring the scholars receive a good education also helps prevent the
exploitation of the boys.
•
Should a player's goal of playing professional football not work out, they have
a good, solid education to fall back upon.
•
The institute offers them protection against unscrupulous agents.
•
Even if boys are fortunate enough to secure a contract with a club, Diambars
keeps close tabs on their progress, with the staff of the academy, including the
professional players that support it, continuing to provide guidance and
protection.
• Collège Africaine Sports Etudes (CASE)
•
•
•
•
Recently also basketball and tennis education
Provides official academic (secondary) education
Strong emphasis on academic education
Initially co-funded by AS Monaco (collaboration
ended now)
• After Monaco stopped funding, asks registration
fees (high!) and survives on proceeds of sales of
some players
• Elite Foot
– Established by foreign Senegalese
internationals
– Education less official than CASE (no
complete package, only informatics, English,
French, some mathematics)
– Registration fee (lower than CASE, still high)
– Funds from private American partner
• Kenza Mariste
– No academic education
– But ! Students are required to show their
monthly school reports → if bad grades:
banned from training until performance at
school again at level
– No submission fee
– No strategic partnerships
Migration & the World Cup
• Potential effects of the World Cup on
migration
– Long-term boost to football from World Cup:
may increase demand for players from other
African countries (more in-migration)
– World Cup may inspire young South Africans
to become international players and may thus
increase investment in youth football (surge in
football academies, see Senegal after World
Cup 2002) (more out-migration)
… Diambars SA
• French star Patrick Vieira, announced the
institute's intention to open the second
Diambars academy in South Africa.
• "We want to build on the momentum
behind the World Cup to promote the idea
that football can be a great instrument to
advance education and promote social
and human development".
Concluding comments
• Research on infrastructure effects well
established
• Research on other economic development
mechanisms not
– Migration literature
– I-O & international organization literature