World Cup Soccernomics

July 8th, 2006 | by: Peter | View Comments

In a report titled “Soccernomics 2006,” economists at the bank ABN Ambro picked Italy as the “economic favorite” to win the World Cup. They actually picked the Italians back in March, before the rest of the world began banking on Italy’s stingy defense to carry them to the championship.

In an inspiring effort to get paid for being soccer fans, (something we know little about here) ABN Ambro looked at the economic impact of previous World Cups, the benefit for the host nation, and the impact of consumer confidence on the economy. The report found that the “top-bill” for the 2006 final would be Germany vs. Italy with the host nation sending the trophy to Italy.

Although both nations are slow growing with inflexible labor markets, high unemployment and inefficient financial systems, Italy is actually given the economic advantage because they are not hosting the tournament. While the difference between Germany’s actual and potential economic output is larger than Italy’s, because Germany is receiving the economic benefit of simply hosting the legions of fans and consumers, the impact of winning is not as dramatic as in Italy. To put it more simply, Germany’s gonna see a whole lot of economic good no matter how their team did, Italy will only see an economic boost if they win.

One would think that simply having a team in the final would stimulate economic growth, but the report indicates that it is pretty much “winner take all” in the World Cup finals, the winner seeing a .7% boost and the loser of the final match seeing a 0.3% reduction in growth. On the stock market the winning country sees a 10% upturn, the losing country a 25% downturn.

But those predictions were made in March, before we knew that Klose was a goal scoring machine and Podolski the best young player. How do these predictions affect the final now that Germany is out?

The way I interpret the information, it simply evens out the economic advantage and raises the stakes for both teams. Based on previous data, the teams can swing their economies 1% positive or negative as consumer confidence is up for grabs when your country is in the World Cup Final.

In other news, Ananova reports that despite an overall poor turnout at brothels during the World Cup, prostitutes are ecstatic that Italy has reached the final. Haki Simsek, who owns Germany’s largest brothel said, “I know I shouldn’t be happy Germany lost, but it’s the best result imaginable for business.”

While everyone else seems to celebrate by drinking. Marlene from Poland explained, “After a win (Italians) are in a great mood and love celebrating with us and after a bad game they need comforting.”

That’s one way to inject Italian money into the German economy, but if Germany is looking to make back whatever economic loss they suffered by not making the final, World Cup Blog HQ can probably cover it just with the deposits on the beer bottles lying around.