Please reference this paper as: Li, S. N., Blake, A. and Thomas, R. (2013) "Modelling the economic impact of sports events: the case of the Beijing Olympics". Economic Modelling, 30: 235-244. This paper is for individual use only. Modelling the economic impact of sports events: The case of the Beijing Olympics ShiNa Li a, ⁎, Adam Blake b, 1 , Rhodri Thomas a, 2 a International Centre for Research in Events, Tourism and Hospitality (ICRETH), Leeds Metropolitan University, UK b School of Tourism, Bournemouth University, UK a r t i c l e i n f o a b s t r a c t Article history: Major sports events are used increasingly by policy-makers to stimulate economic development. This has Accepted 9 September 2012 resulted in a growth of academic interest in ways of analysing their contribution. Following a review of the literature on the contrasting approaches that have been used, this paper assesses the economic impact of JEL classification: the Beijing Olympics, in particular the tourism impact, using computable general equilibrium (CGE) model- L83 ling. To add novelty, it analyses the data under conditions of imperfect competition, an approach that has C68 been used to good effect in other contexts, notably international trade. The findings suggest that staging Keywords: the Beijing Olympics brought economic benefits to the host economy but that the scale of the impact was Economic impacts not significant compared to the total size of the economy. The welfare impacts of the Beijing Olympics Tourism impacts under imperfect competition are shown to be higher than when perfect competition is assumed. This is The Beijing Olympics explained by the pro-competitive effect. Computable general equilibrium modelling imperfect competition Abstract 1. Introduction Sports governing bodies, such as the International Olympic Committee (IOC) and the Fédération Internationale de Football Association (FIFA), have started to allocate their championships, in part, on the basis of their potential for promoting economic development in particular con- texts (Clark, 2008). In recent years, this has resulted in several major sports events being held in developing countries; the 2008 Olympic games in Beijing, the 2010 FIFA World Cup in South Africa, the 2014 FIFA World Cup and the 2016 Olympic games to be held in Brazil are all contemporary examples. Governments eager to host these events justify their actions on the basis that gross domestic product (GDP) will increase and, as a consequence, their populations will eventually be better off (Dwyer et al., 2004). The efficacy of such claims is unclear and can only be judged following rigorous empirical assessment, probably on a case- by-case basis. Various methods have been applied to assessing the economic ef- fects of large sports events. These include inputƩoutput (IƩO) modelling (see Humphreys and Plummer, 1995; Jang et al., 1999), computable general equilibrium (CGE) modelling (see Blake, 2005; Bohlmann and Van Heerden, 2005; Giesecke and Madden, 2007; Li and Blake, 2008; Li et al., 2011; Madden, 2002, 2006; New South Wales Treasury, 1997) and econometric modelling (see Baade et al., 2008; Hotchkiss, et al., 2003; Kasimati and Dawson, 2009). Although IƩO modelling was the most commonly used method in event impact analysis, it has fallen out of favour because of the limitations of the assumptions used (Dwyer et al., 2000). CGE modelling makes more realistic assumptions, which helps explain why it is now considered a more appropriate ap- proach than the IƩO modelling to assessing the economic impact of events (Dwyer et al., 2004). Macro-econometric modelling is less com- plex and requires fewer data than CGE modelling but fails to capture the interrelationships of different industries in an economy (Russo, 2009). Perhaps not surprisingly, CGE modelling is gaining currency as a power- ful means of assessing the economic effects of hosting major events but its application to date remains very limited. Previous studies of the economic impact of sports events using CGE modelling have all applied the assumption of the perfectly competitive markets. As this is an idealised market structure, it may be useful analyt- ically but is ultimately unrealistic. The economic impacts of events esti- mated using perfectly competitive market assumptions can, therefore, only be valid in the context of an ideal economy and may differ signifi- cantly from the real economy. Most markets are imperfectly competitive, in particular service industries which have a variety of products, high mark‐up and restrictions to entry (Blake et al., 2006). Most industries af- fected by the staging of large sports events are services related to tourism such as restaurants, hotels, media, communication and entertainment. It seems appropriate, therefore, to assume imperfect competition when evaluating the economic effects of sports events. CGE modelling with im- perfect competition has been widely used in the field of international trade, such as trade policy analysis, trade integration and liberalisation,