Wealth inequality and mega events

Abstract

Wealth inequality, both within and between countries, is on the rise, prompting various interventions to address this issue. In this context, some governments could perceive hosting mega events as an opportunity to generate economic and social benefits through directed long-lasting investments and to converge with other countries in the region. However, the impact of these costly events on wealth inequality could be detrimental, depending on the quality of existing distribution channels. This paper aims to understand the potential role of mega events in addressing wealth inequality. We empirically test the impact of sports mega events on wealth inequality across more than 120 countries. Utilizing panel data analysis on a comprehensive dataset dating back to 1900, we find that hosting mega events such as the Olympic Games, FIFA World Cups, and Universal Expositions is associated with an increase in the wealth shares of the top 1% and 10%, often at the expense of the bottom 50%. This effect is double in magnitude in non-democracies and non-OECD countries, as well as higher during the organization of FIFA World Cups. We propose two possible explanations for this phenomenon: episodes of extreme growth during the organization of mega events that disproportionately benefit the wealthiest individuals, and vested interests associated with the organization of such events. Our results remain statistically significant under various model specifications.