The World Cup Dilemma: Prestige at a Price?

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By Alexander Kenerson and Henry Mariscal

The World Cup captures the world’s attention and unites fans around the most popular sport on the planet. Featuring the top players from 32 nations, it stands as the pinnacle of international soccer competition. The World Cup has a big influence on national economies through increased tourism, infrastructure investment, and short-term boosts to consumption. Studying it can reveal how large-scale events impact GDP, employment, and economic growth. The World Cup occurs once every four years, gaining the attention of over 1 billion viewers. Brazil was announced the host for the 2014 World Cup in 2007, while Qatar was announced as the host of the 2022 World Cup in 2010. Qatar is a small but wealthy country for its size due to its exports of oil and gas, while Brazil is a very large country with a focus on services. We are studying the effects that hosting a World Cup had on Brazil and Qatar’s labor market and economic growth. We hypothesize that being the host of a World Cup will increase economic growth and expand the labor market.

Being picked to become a host country for the World Cup is a huge honor, however it comes with its responsibilities as well: financial, infrastructural, and logistical planning. Stadiums need to be built, requiring a large amount of labor as well as spending capital. Brazil spent an estimated $11 billion dollars in preparation for hosting in 2014, while Qatar in 2022 spent an estimated $200 billion dollars in preparation for hosting. This is significant expenditure in preparation for holding a months-long tournament, and it is relevant for potential future hosts to know whether this brings substantial long-term economic rewards or if their main goal is international recognition and global branding.

The Berkeley Economic Review published an article investigating the financial and social costs of the World Cups in Brazil and Qatar. This article found that Brazil’s spending for this World Cup increased inflation and angered its citizens due to major tax increases. Furthermore, based on the Gini Coefficient of developed countries in the world, Brazil has one of the most unequal economies. Inequality did not improve as a result of these games, in fact, almost 200,000 citizens were evicted and relocated due to construction. The costs of hosting the games were viewed as an investment to increase employment in the country. However, Brazil’s soccer devoted citizens skipped their jobs causing the employment rate to decrease. The article also states that Qatar is a rich country due to its energy sector, however, it still had to increase taxes on its citizens to finance this event. Although this event did stimulate tourism, it also caused bad publicity due to reported human rights violations in the construction of the stadiums. Overall, this article highlighted that although the World Cup is a very popular event that is very tempting to host, it can have negative effects on the economy.

Data Analysis

We graphed the employment-to-population ratio (EPR) for both Brazil and Qatar, anticipating an increase following the host country announcement due to rising infrastructure demands and preparatory projects. Qatar’s EPR increased steeply from 2005-2009 and continued increasing at a slower rate until leveling off around 2016 at an incredible 87.5%. On the other hand, Brazil’s EPR reached an all time high in 2008, roughly around 62% and proceeded to decrease steadily until rebounding back up after COVID-19.

Figure 1

(Source: World Bank)

Qatar has a population of 2.7 million people, and is known for having a large migrant labor force, accounting for more than 90% of their labor force. Qatar’s sharp increase in employment to population ratio starting in 2005 was driven by high global energy prices and massive expansion in their natural gas industry. After Qatar was chosen to host the World Cup in 2009, the demand for foreign labor further increased, which is shown by the continued growth of the EPR until 2016.

Brazil’s labor force was hit hard due to the global financial crisis in 2008 and continued to shrink until the end of COVID due to falling GDP, political instability, and a lack of demand in the economy- resulting in layoffs and discouraged workers. However, the leadup to the World Cup from 2010-2014 shows a period of stagnation amongst an otherwise downward sloping EPR from 2008 to 2020. This shows that the World Cup offered brief economic relief during a period of financial hardship.

We graphed the real GDP per capita in Brazil and Qatar from 2000 to 2023, the FRED data we used labeled it as Constant GDP, however they are synonymous. We used a per capita metric to account for an increase in workers as a result of higher demand for labor leading up to the world cup. Qatar’s real GDP per capita increased quickly from January 2009 to January 2011, and steadily decreased throughout the next decade and leveled out around the time of the 2022 World Cup. As shown in Figure 2, the real GDP per capita of Brazil increased significantly from 2007 to 2014. However, Brazil’s real GDP per capita significantly decreased for the years following the World Cup.

Figure 2

(Source: World Bank)

Brazil announced the World Cup in October of 2007, while Qatar announced it in December of 2010. Both countries announced the World Cup in a period of economic growth, however, Brazil continued to grow until the World Cup while Qatar experienced decline the entire decade before the World Cup. Brazil’s GDP per capita declined post-World Cup while Qatar’s GDP per capita appears to remain stable after the World Cup.

Brazil’s mid-2010s recession had causes other than the World Cup, however, the Berkeley Economic Review article attributes some of the economic problems to spending on unnecessary projects. The recession visible on Figure 2 occurred right after the World Cup, as it started in 2015. For the World Cup, Brazil improved its airport infrastructure, yet Brazil neglected the obvious plumbing and road problems. Furthermore, Brazil’s lavish stadiums that were part of the $11 billion preparation cost now host games with spectators at around 3% capacity meaning these stadiums operate at a net loss.

Meanwhile, Qatar’s increase in GDP in the period before they announced the World Cup likely had to do with oil prices increasing by 15% in 2010. Qatar’s stable post-World Cup GDP per capita reveals that the World Cup likely did not significantly impact their economy. However, its economic plan for the future is economic diversification outlined in Qatar’s Vision 2030. Qatar was using the World Cup to achieve this goal by increasing tourism. From the fourth quarter of 2021 to the World Cup, Qatar increased its hotel capacity by about 100,000 rooms, and the total number of people staying in hotel rooms increased by about 50,000 people, despite the average hotel price being over double from late 2024. Although Qatar’s World Cup did not significantly increase real GDP per capita, it did further its goals of increasing tourism and diversifying its economy.

Conclusion

Our research examines how hosting the World Cup influenced Brazil and Qatar’s economic growth and labor markets. After analyzing the data, there is no clear long-term evidence that hosting the World Cup guarantees sustained economic growth or a stronger labor force, though it is worth noting that Qatar hosted only two years ago. One guaranteed outcome of hosting the World Cup is increased global attention, which can be especially beneficial for a country like Qatar as it seeks to diversify its economy. External economic and political factors, such as inflation and government stability, play a crucial role in shaping a country’s economic trajectory and labor conditions. If we were to study more on this topic, the effects of the World Cup on wealth inequality would be valuable to learn about, specifically in a country like Qatar.

References

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