Missy Franklin, America’s newest star swimmer and most winning Olympian this summer, took home $110,000 in addition to her four gold and one bronze medals. That’s because the United States Olympic Committee pays athletes $25,000 for each gold, $15,000 for each silver, and $10,000 for each bronze medal they win. The United States isn’t alone in rewarding winning athletes. At least 42 other countries also pay winners, with payouts for gold ranging from about $11,000 in Kenya to $1.2 million in Georgia.
(click the picture to enlarge it)
Incentives might mean more than money. In 2008, medalists from Belarus received not just money, but also free meat for life. At least one country includes a stick in addition to its incentive carrot. North Korea, which is apparently the basis for The Hunger Games, reportedly rewards its gold medal winners “with handsome prize money, an apartment, a car, and additional perks like refrigerators and television sets,” while “poor performances” could yield time in a labor camp.
Why do countries pay winners? The most obvious answer is that they want to create an additional incentive to win. But does it? We set out to answer this question.
We put together data on each country’s medal count and medal payout scheme for the 2012 Olympics in order to test for a correlation. We also control for country size and income, since those are surely the biggest predictor of how many medals a country will win: more populous countries are more likely to have that rare human who is physically built and mentally able to become an Olympic athlete, while richer countries are more likely to be able to invest in training those people.
Thus, we estimate the following regression:
Medalc = f(populationc, per capita incomec, medal payoutc), where c indicates the country. The table below shows the results. As expected, bigger and richer countries win more medals, especially gold medals. Curiously, however, medal payouts are negatively correlated with winning medals, and this correlation is statistically significant for bronze and silver medal payouts.
Table 1: Relationship Between the Number of Gold, Silver, and Bronze Medals and Country Characteristics
(including only countries for which we could find information)
What could explain this counterintuitive result?
One possibility is that it is simply wrong. Data on medal payouts do not exist in one place, so we had to search for information on each country. As a result, just because we could not find data on a country’s payouts does not mean it doesn’t have any. In the analysis above I excluded countries for which we had no information on medals. Most of the countries omitted probably did not offer rewards, but we cannot say this with certainty.
We can partially address this question by assuming—and I emphasize that this may be an inappropriate assumption—that countries for which we found no data have no payouts and re-estimating the regression. The table below shows these results. Under this assumption, the results change slightly. Gold and silver payouts become positively correlated with number of medals won, but are far from statistically significant. In other words, this analysis simply suggests that there is little, if any, correlation between awards and medals. Payouts for bronze medals, however, become positive and statistically significant.
Table 2: Relationship Between the Number of Gold, Silver, and Bronze Medals and Country Characteristics
(including all countries and assuming no information on rewards means country does not offer rewards)
Another complication is that this analysis does not take into account non-monetary payouts, such as meat-for-life, or punishments like banishment to labor camps, but we do not have a way at the moment to incorporate that information empirically.
Finding no correlation between monetary payments and medals is not surprising in some countries. In the United States, for example, $25,000—while perhaps today a sizable per-medal sum for high school student Missy Franklin—is dwarfed by the millions of dollars she can earn in endorsements now that she has won her medals.
Such valuable endorsement opportunities, however, are probably less common in other countries, while the relative value of the rewards might be much higher. So, for example, $11,000 in Kenya may provide a much stronger incentive than $25,000 in the United States. We test this hypothesis by running the original regression and excluding richer countries. I exclude the tables here, but the results do not change: even including only poorer countries, where the rewards are more likely to make a material difference in someone’s life, rewards are not significantly correlated with winning more medals, even controlling for population and income.
Another explanation for these results is that elite athletes likely compete for a host of reasons unrelated to money: because they love their sport, because they want to be the best, or for other personal reasons that give them satisfaction.
But why would payouts be negatively correlated with winning medals? My guess is that in reality they aren’t. Instead, the payouts proxy for something else. Perhaps countries that give larger monetary payouts perform worse than one would expect given their size and wealth, and hope that the payouts incent better performance by their athletes. In this case, payouts would be negatively correlated with a country’s performance, all else equal, not because they are not incentives, but because they are there because the country should be doing better.
Still, overall the evidence suggests that these payments don’t increase the medal count. And because they benefit such a small number of athletes it’s hard to argue that they are important for making it possible to make a living as an Olympic-level athlete.
Overall, if the desire is to create additional incentives to win, countries might want to re-think their reward system.
Note: I thank Corwin Rhyan and Anjney Midha for for their excellent research assistance and indulging me by hunting laboriously for data on the olympics even though we work at a think tank devoted to technology issues.
 We tried to find information for 2008, but could confirm information for only 10 countries.