The Econometrics of Sport

The Econometrics of Sport

New Horizons in the Economics of Sport series

Edited by Plácido Rodríguez, Stefan Késenne and Jaume García

The study of sport in the economy presents a rich arena for the application of sharply focused microeconomics, macroeconomics and econometrics to both team and individual outcomes. This unique book offers a survey of recent research that follows the tradition of empirical and theoretical analysis of sport economics and econometrics.

Chapter 3: Wages, transfers and the variation of team performance in the English Premier League

Stefan Szymanski

Subjects: economics and finance, econometrics, sports

Extract

In the world of football, transfer fees are investments in intangible fixed assets – the cost of acquiring the player registration which ties the player to the club for the life of his contract. The contract also specifies a wage payment schedule over the life of the contract. This chapter uses a database of player transfer fees and wage payments to measure the relationship between expenditures and team performance. The standard formal model of a sports league is a contest in which teams compete for a share of success (win percentage, points or league rank) by investing in playing talent. This structure was adopted in the first formal models produced by El Hodiri and Quirk (1971) and Quirk and El Hodiri (1974), and subsequently extended by Atkinson et al. (1988) Fort and Quirk (1995), Vrooman (1995), Késenne (2000), Szymanski and Késenne (2004) and Dietl and Lang (2008).

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