Economic Impact on South Africa post Soccer World Cup: Research Proposal - Essay Example

Economic Impact on South Africa post Soccer World Cup: Research Proposal Table of Contents Introduction 3 Aim and objectives 4 Literature Review 5 Research Methodology 6 Data Collection 7 Data Analysis or Interpretation 7 Results, Findings and Discussion 9 Gantt chart 9 References 10 Bibliography 11 Introduction Major events like sports which have a global dimension are likely to affect the global economic scenario significantly. The impression is especially great in case that the host economy is a developing one. Given the positive vibes that such an event is likely to create, it could actually boost the situation for business research in the concerned nation. Global events like sports could be compared to exogenous positive shocks which push the aggregate demand schedule in a positive direction and hence, instigate producers to supply more. During the process, their marginal revenues are pushed up thus widening their profit margins. Hence, sellers rarely want to let go of such lucrative opportunities which is why such an event in the background makes substantial room for business research. The Soccer World Cup hosted by South Africa in 2010 created an economic upheaval particularly owing to its developing state. Frankly however, such a global event could influence the economics of a developed nation as well though the differences are found to be slighter than that in case of a developing nation. Developing nations like South Africa generally need an external boost to push it to a path of development and the Soccer World Cup played just the role. The positive influence that the event created upon the economy could be experienced even past 2010 and from a year ahead. Preparation for the event had been a year long process which created positive influence over quite a few significant arenas of an economy such as creation of 400,000 jobs, inflow of FDI and a number of areas which ultimately led to a rise in the national income (Brulliard, 2009). An economic theory which describes the stride of a developing nation towards economic growth is the trickle-down strategy which is a modification over the unbalanced growth theory of Hirschman (Rees & Stafford, 1986). According to the theory, every aspect of an economy cannot be boosted towards the right direction simultaneously. In most of the cases, only a selected few sectors of an economy could be supported financially and the impact of the initial boost are transferred to others. The ultimate outcome of this development is an economic enhancement as the present paper surmises. Aim and objectives The research aim underlying the present paper will be to evaluate how far the soccer world cup of 2010 held in South Africa affected the economy of the nation. South Africa being a developing nation needs an external boost at any point of the time so as to enhance its economic growth rate. This research paper could be treated as a case study where the impact of an exogenous shock would be assessed on the demand schedule of a developing nation. The Soccer World Cup, a global event, might lead to an influx of tourists which could push up the demand schedule in the positive direction. Furthermore, preparation for a popular event such as the World Cup could take up a prolonged period of time and employs a large number of people in the process hence creating employment within the nation. Furthermore, the demand for investment in the host nation rises as well which actually spurns the national income of the concerned nation. Such a process could actually boost the economic growth rate of a nation, especially when it is a developing one. In order to evaluate this theoretical truth, the present paper carries out an empirical examination of the fact in context of the developing economy of South Africa. The possible outcome of the research could actually assist in enhancing the preparations of the national government when faced with an upcoming important event like the World Cup. This is because such an event not only promotes economic development in a nation but is also associated with betterment in the innate infrastructure of the concerned nation. Hence it is important for the nation to be prepared aptly for the purpose given that potential gains from an incident cannot be availed if the underlying factors are not utilised to their optimum level. This is in line with the economic theory that unless marginal productivity of factor is realised to its fullest, the profit margin cannot be maximised (Mankiw, 2008). The economic impact that a global impact is likely to impose upon a nation could be observed both in qualitative as well as quantitative terms. The quantitative boost that the positive exogenous shock is expected to produce could be evinced from various figures like employment rate, GDP, FDI inflows as well as rate of domestic investment. However the qualitative aspects of the same could be represented by betterment in the standard of living though this aspect too could be measured through estimating a few selective variables like deterioration in the poverty rate of the concerned nation, betterment in the consumption basket of the economy (estimated by means of rising demands for premium products), etc. But these are only indirect aspects of the economic impact that such a global event had over the developing nation. Nonetheless, an in depth study into the present topic could aware national governments of developing nations highly about the possible preparations it must undertake in order to make way for a global event and could also teach the producers about the provisions they must keep in supply in order to meet the increased demand. Hence, the research objectives in the present case could be articulated as follows – Firstly, the research tries to pick up the fundamentals which actually took care of the infrastructural aspects in a developing economy like South Africa prior to hosting a global event like the Soccer World Cup of 2010. Secondly, the arenas which the domestic producers had to make provision in order to deal with the high demand will be assessed in the present paper. Thirdly, the economic impact that the event created over the nation will be evaluated for encouraging any developing nation interested in hosting such events in future. Literature Review Positive demand shocks are likely to create a heavy impact upon the economic development of a nation (Devlin & Estevadeordal, 2003). In most of the cases, they lead to an appreciation in the equilibrium price level as it might not be possible to make adjustments in terms of aggregate output over the short run (D’Souza, 2009). However, over the long run, the full employment level of the concerned nation grows thus pushing up the GDP of the economy (Hall & Lieberman, 2009). On the other hand, as short run adjustments are difficult to make, the ultimate outcome is an appreciation in the price rate of the economy which in turn pushes up the domestic rate of exchange. This appreciation might have detrimental effects upon the international trade scenario as export demand becomes unappealing (Sinclair, Driver & Thoenissen, 2005). However, the influx of foreign direct investment as well as institutional investment is worth mentioning as investors from all over the world pour in their resources in the nation with an eye on the hefty returns that those investments are going to pay back. In addition, over the long run this trend is unlikely of getting withdrawn given that the nation already has an appraised GDP. This is a very important factor and one of the fundamental elements behind a nation’s popularity for returning high pay-back values (Laldi, 2008). As the nation’s aggregate output is boosted over the long run, various economic factors associated with it, viz., rate of employment, rate of investment, etc. are also expected to rise eventually. This is how most of the developing nations in the world have attained and tasted success. But in most of the cases, this improvement comes following the principles of a trickle down effect where betterment in one sector is likely to produce repercussions in a number of associated sectors. Positive demand shock could arise out of many events and an example of the same could be sought from the situation in South Africa which gained momentum around the World cup Soccer in 2010. In the present case too, the economic boost could be regarded as an impact of a boost to the leisure industry which led to upheavals in a large number of associated segments of the economy and finally an enhancement in the economic position of the nation. Reports suggested an improvement in a variety of economic aspects of South Africa which actually assisted in boosting the national income and growth level to marvellous heights. In addition, an economic boost at one point of time is likely to produce a flow of such enhanced periods of economic experience as the concerned nation continues to earn an improved income over many periods to come ahead. Research Methodology The aims and objectives of the present research paper will be to assess the economic impact that the Soccer World Cup had created over the economy of South Africa both prior and post the tournament. The objectives of the paper will be to assess the change in situation, if any, in the administration of the nation as well as the business situation in the same. However, given that an economy generally consists of a large number of factors, assessment of an economic change requires the examination of all of them as well which might be quite tedious in nature but has a high probability of imparting the right information. The most appropriate methodology to be followed in this regard should be that of secondary research even though that would require collecting the data for a large number of variables important for an appropriate economic judgement. Primary research techniques could also be employed in this case but have been avoided due to certain limitations associated with it. Some of those limitations are – Cost and time involved in data collection (Kurtz, MacKenzie & Snow, 2009) Professional training necessary to carry on with primary research techniques such as framing a suitable questionnaire and appraising individual responses (Craig & Douglas, 2005). Small sample size could lead to biased outcomes which is generally not the case for secondary research methods (Hoyle, 1999). Data Collection Data could either be collected through primary research or through employing secondary research techniques. However, there are some intrinsic problems associated with primary data collection arising from high costs of collecting data and compensate for the time, assessing the responses so collected through employing quantitative as well as qualitative techniques. In addition, secondary data could be brought into use much more easily and efficiently given that they had already been published in some other source which guarantees their reliability. Furthermore, secondary data could be examined through employing statistical methods fair enough to erase any room for doubts (Wrenn, Stevens & Loudon, 2002). However, the only challenge in this regard will be to identify the time range which is important and is likely to show a significant change in between the mean values. An excessively large time range will lead to unnecessary clumsiness in the data which is unwanted. Hence, assistance will be sought out from newspaper and journal publications so as to distinguish the time span to be considered. In the present case, newspaper reports have classified the period since 2009 to be that of high economic activity in South Africa. Thus, the time range to be considered in the present case will be that between 2005 and 2010. But, this span of five years has been divided into two parts to differentiate between the economic situations between these two. Hence, the prime importance in this regard has been imparted to publications in secondary sources about the proceedings in an economy. Data Analysis or Interpretation The data been collected thus will belong to these five years and should essentially be quarterly in nature. Rationale behind the selection of quarterly data is that the greater the frequency of data is, better will be the statistical assessment firstly due to a bigger sample size and secondly as the fluctuations so captured could locate the actual picture. It will be collected from authentic secondary sources like the archives of World Bank or OECD, which provide latest information on a large number of important economic variables. The data so collected will be on variables such as economic growth rate, growth in per capita income, rate of unemployment, FDI inflows, growth rate in the investment of the nation and hike in the income of the tourism sector of South Africa. The sample data to be collected will consist of 24 data points with 4 quarters of each of the 6 years between 2005 and 2010. Number of data points in this case is quite small but there seems to be no other option given that data on most of the economic variables being considered are not published at a frequency higher than that. The data so collected will be segregated into two groups – between 2005 and 2008 and between 2009 and 2010. The statistical technique employed to distinguish between the economic situations in the two periods will be that of Independent Sample Student’s t-test for equality of means, assuming unequal variance (Johnson & Kuby, 2007). Hence, the relevant null hypothesis in this regard will be that of testing whether the mean values for each of the variables between the two classified periods is similar or not. The relevant null hypotheses will be statistically tested through holding comparisons with the critical values as well as by means of the p-values of the estimated test statistics (Anderson, Sweeney & Williams, 2009). In case that they are found to be statistically significant as per the rules, the relevant null hypotheses would be rejected implying that the mean values are different between the two periods. In order to emphasise more about the direction of change, the method of right tailed test will be followed which would be reflected in the alternative hypotheses. Thus, If p-value of the estimated statistic falls short of the assumed level of significance, α, then the respective null hypothesis has to be rejected and the greater than type alternative hypothesis will be accepted. On the other hand, a larger p-value will imply non-rejection of the relevant null hypothesis (Utts & Heckard, 2006). Results, Findings and Discussion To stress upon the vivacity of the result, some amount of qualitative research will be conducted as well. In order to support the empirical outcome of the paper, instances from real life will be adopted as well. The result to be obtained at the end of the paper is likely to be in favour of positive economic changes in South Africa post and just prior to World Cup Soccer. Hence, additional information about the number of jobs being created and the amount of economic growth that the nation achieved could be added along with the empirical results attained in the paper. Gantt chart The following is the Gantt chart representing the time table of undertaking the research (Milošević, 2003). The total time to be spent in accomplishing the work will be 26 days between 1st April, 2011 and 26th April, 2011. References Anderson, D. R. Sweeney, D. J. & Williams, T. A. (2009). Statistics for business and economics. USA: Cengage. Brulliard, N. (2009, June 11). 1 year until South Africa hosts soccer World Cup. Global Post. Retrieved from http://www.globalpost.com/dispatch/south-africa/090610/one-year-hosting-world-cup-south-africa-looks-at-soccer-tournament Craig, C. S. & Douglas, S. P. (2005). International marketing research. London, UK: Wiley. D’Souza, E. (2009). Macroeconomics. New Delhi, India: Pearson. Devlin, R. & Estevadeordal, A. (2003). Bridges for development: policies and institutions for trade and integration. New York, USA: IDB. Hoyle, R. H. (1999). Statistical strategies for small sample research. London, UK: Sage. Johnson, R. R. & Kuby, P. J. 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