The Leontief Matrix, the Keynesian Cross, and Economic Insensibility of Hosting the Olympics: A Survey of the Korean Experience

Abstract

Korea will have hosted 13 international mega-events by 2018. Therationale for attracting an event to Korea is often its economic impact, namely,induced production, income, and employment effects. These effects areestimated by one of the state-run research institutes using the Leontiefinput-output model. One big problem with such a practice is that the model isinapplicable to the national decision whether to host a mega-event. As aconsequence of inappropriate feasibility studies, national resources mightpossibly have been misallocated over decades. The Keynesian cross is notapplicable, either. Instead of those two popular models, a holistic cost-benefitanalysis should be conducted for a national project. This paper reviews a totalof 17 feasibility studies for 13 mega-events, explains their methodological andpractical errors, and suggests the right approach.