|  | Current Issues | No.51 September 2007 |

Unemployment Effects of the 2006 Soccer World Cup in Germany Florian Hagn & Wolfgang Maennig |
No two ways about it: the soccer World Cup competition in June 2006 in Germany was a great experience, not only for the soccer fans, bit its impact still resonates far and wide. From an economic point of view, various commentaries have all concluded that the effects were positive. Those commentaries were in line with a series of analyses published prior to the event, according to which the investments of around €6 billion in connection with the competition, in conjunction with the expected expenditure of 1–2 million foreign visitors, would markedly affect income and employment in Germany. Our study (Hagn and Maennig 2007a) is the first work that examines the effects of World Cup 2006 in Germany on an ex post econometrical basis. It is the first multivariate study to examine the employment effects of a major sporting event outside the USA. This is particularly interesting set against the backdrop of contrasting modes of functioning between labour markets in the USA and Europe. In addition, the study also tests for method sensitivity by running the dataset in parallel with the three methods usually applied in studies on US sport events. A fourth method is applied, which attempts to overcome potential shortcomings associated with the other three by using an extended “Difference-in-Difference” estimate to compare the development unemployment numbers in the 12 World Cup venues with the development of the unemployment numbers in 63 other German cities. The results of our study demonstrated that the 2006 World Cup did not influence unemployment in the 12 match venues to an extent that was significantly different from its pattern in non-venues. These results correspond with almost all ex post multivariate income and employment analyses of major sporting events and venues which show no short term income and/or employment effects that are significantly positive (Baade and Matheson 2004 for the soccer World Cup 1994 in the USA; Szymanski 2002 for the twenty largest economies in over the past thirty years, many of which have hosted the Olympic Games or the soccer World Cup at least once during that period). The results are also in line with a study by Maennig (2007) using descriptive statistics that comes to the conclusion that the effects of the World Cup 2006 in retail business, tourism and employment were not sufficient to have any overall economic significance. Concerning potential long-term effects, Hagn and Maennig (2007b) analyse the employment effects of the soccer World Cup 1974 in Germany. They conclude that that the World Cup was not able to generate any short to long-term employment effects. We nevertheless hesitate to share the concern expressed both implicitly and explicitly in many of the comparable sports economic studies that the positive effects of sporting events claimed by many protagonists are not true and that (bids to host) major sporting events are inefficient from an economic point of view. There are three reasons for this: Firstly, other effects such as the feel-good benefit to the population and/or difficult to quantify image effects may be sufficiently important to justify major sporting events and/or subsidies for them from public funds. In both of the above-mentioned fields of possible effects, sporting economic empiricism is still in its infancy. Secondly, the treatment group in the selected form of municipality areas might be too large and too highly aggregated to statistically prove significant effects. Studies on the effects of major sports venues on property values in surrounding areas indicate a maximum affect area of around 3,000 metres (Ahlfeldt and Maennig 2007). Thirdly, the employment effects claimed by the sports protagonists, which are usually based on corresponding ex-ante impact studies, cannot strictly speaking be rejected by testing for significant differences from zero. Their rejection would be possible if the postulated values were tested directly. However, this would not be regularly successful in the relevant studies because the effects claimed are so close to zero. References Ahlfeldt, G. & Maennig, W. (2007) Impact of Sports Arenas on Land Values: Evidence from Berlin, Hamburg Working Paper Series in Economic Policy, Nr. 03/2007. Baade, R.A. & Matheson, V.A. (2004) The quest for the cup: Assessing the economic impact of the World Cup, Regional Studies, 38, 343-354. Hagn, F. & W. Maennig (2007a), Labour market effects of the Football World Cup 2006 in Germany, forthcoming in: Applied Economics. Hagn, F. & W. Maennig (2007b), Employment effects of the Football World Cup 1974 in Germany, forthcoming in Labour Economics. Maennig, W. (2007) One year later: A re-appraisal of the economics of the 2006 soccer World Cup, Hamburg Working Paper Series in Economic Policy, Nr. 10/2007. Szymanski, S. (2002) The economic Impact of the World Cup, World Economics, 3(1), 169-177. Contact Prof. Dr. Wolfgang Maennig Hamburg University Hamburg, Germany Email: w.maennig@arcor.de www.uni-hamburg.de/economicpolicy http://www.icsspe.org/portal/index.php?w=1&z=5 Unemployment Effects of the 2006 Soccer World Cup in Germany Florian Hagn & Wolfgang Maennig