The Long‐Term Impacts of the 1998 Nagano Winter Olympic Games on Economic and Labor Market Outcomes

• Date: 01 January 2016
• Author: Koyo Miyoshi,Masaru Sasaki
• DOI: http://doi.org/10.1111/aepr.12115
• Published date: 01 January 2016

The Long-Term Impacts of the 1998 Nagano

Winter Olympic Games on Economic and

Labor Market Outcomes

Koyo MIYOSHI1and Masaru SASAKI2†

1Aichi Gakuin University and 2Osaka University

This paper aims to assess the long-term effects of the 1998 Nagano Winter Olympic Games on

various economic and labor market outcomes in Nagano Prefecture. One-shot and large-size

events, such as the Olympic Games, are expected to boost the local economy and create jobs, thus

leading to lower unemployment. In addition, the tightening of the local labor market eventually

raises wages. Using the synthetic control methodology, we build counterfactual dynamics of

various economic and labor market outcomes for Nagano Prefecture, and then comparethese out-

comes with the actual data for these variables. This allows us to determine how the local economic

and labor market outcomes in Nagano Prefecture would havebeen different had the 1998 Olympic

Games not been held there.

Key words: economic outcome, impact analysis, labor market, Nagano Olympics, production by

industry

JEL codes: J21, L83, O11, O18, R53

1. Introduction

This paper aims to assess the long-term effects of the 1998 Nagano Winter Olympic

Games on area-specific gross domestic product (GDP) and labor market outcomes in

Nagano Prefecture, including Nagano City and its neighboring towns and villages. One-

shot and large-size events, such as the Olympic Games, are expected to create jobs,

increase consumption, and boost GDP, thus leading to improved living standards. In

addition, the tightening of local labor markets eventually lowers the unemployment rate

and raises wages. However, it is not enough to evaluate the economic effect of mega-

events, such as the Olympic Games only, in the short-term.

The Olympic Games initially provide benefits to some specific industries and those

who are employed in these industries, and then spill over to the whole local economy

slowly over time. The local government that hosts the Olympic Games increases infra-

structure expenditure for the Olympic Games (for the Nagano Olympics, Shinkansen

The authors are grateful to the editors for their detailed comments and suggestions that have

improved this paper. The authors also thank Hiroaki Miyamoto, Chalongphob Sussangkarn, the

participants in the Asian Economic Policy Review Conference, and the students belonging to the

Sasaki research seminar for their help and assistance. All errors are our responsibility. Financial

support from MEXT Grant Nos. 23330080 and 15H03362 is gratefully acknowledged.

†Correspondence: Masaru Sasaki, Osaka University, 1-7 Machikaneyama, Toyonaka, Osaka 560-

0043, Japan. Email: sasaki@econ.osaka-u.ac.jp

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doi: 10.1111/aepr.12115 Asian Economic Policy Review (2016) 11, 43–65

© 2016 Japan Center for Economic Research 43

bullet trains, highways to reach Nagano City, and venues for Olympic events). These

public works not only provide huge benefits to the construction sector in the short term,

but also easily attract tourists to the host city and enable the host city to lease the venues

for music concerts and other events after the Olympics. These economic activities

derived from the Olympic Games furthermore boost the local economy and create jobs

for local residents. The opposite story is possible, too.The facilities and venues to be built

for the Olympics are actually wasteful, and then they are not used afterwards. In the face

of it, the host government continues to incur the cost of maintaining these facilities and

venues.

It should be noted that the host receives economic gains or incurs losses from the

Olympic Games over the long term. Our concern is which is larger,the gains or the losses.

To explore this question, it is necessary to consider the long-term effects of the Olympic

Games.

Using the synthetic control methodology developed by Abadie, Diamond, and

Hainmueller (2010) (denoted ADH hereafter), we build counterfactual dynamics of

various outcomes for Nagano City and its neighboring towns and villages, and then

compare these with the actual data for these variables. This allows us to determine how

the local economic and labor market outcomes in Nagano City and its neighboring areas

would have been different had the 1998 Olympic Games not been held there. We employ

two types of time series datasets: data from the System of National Accounts (SNA) and

administrative data on job findings (Shokugyou Antei Gyoumu Tokei).The counterfactual

outcome for Nagano Prefecture (treatment group) is calculated using a weighted average

of outcomes of the 46 remaining prefectures in Japan (control group).

The main findings are summarized as follows. To begin with, we find evidence of a

long-term positive impact of the Nagano Olympic Games on the local economy,in terms

of total GDP, but not in terms of per capita GDP. Using placebo tests, the difference

between the actual and counterfactual GDP for Nagano Prefecture is found to be reason-

ably large, compared with other differences created by placebo studies,treating the other

prefectures as a treatment group, after the seventh year after Nagano City won the inter-

national competition to host the Olympic Games. However, the same result is not

obtained for per capita GDP. An increase in prefectural GDP is partly attributable to an

increase in population size, which thereby supports the evidence of no long-run impact

on per capita GDP.

Another finding is that the Nagano Olympic Games had a significant impact on pro-

duction in the construction in the short term, but not in the long term. Positive impacts

are found in the real estate and service sectors. The placebo tests confirm that the

Nagano Olympic Games had long-run, positive impacts on activity in the service and

real estate sectors. Although the real estate sector thrived, the Olympics did not affect

land prices in Nagano Prefecture.

We next summarize our findings about the effects of the Olympics on local labor

markets. The actual jobs-to-applicants ratio moves procyclically with economic activity

after the Nagano Olympics. The counterfactual ratio moves closely with the actual ratio,

which implies that the difference between the two jobs-to-applicants ratios is very small

Impacts of Nagano Winter Olympic Games Koyo Miyoshi and Masaru Sasaki

© 2016 Japan Center for Economic Research44