Aggregate Wages Of Players and Performance in Italian Serie A

Caruso, Raul and Di Domizio, Marco and Rossignoli, Domenico (2016): Aggregate Wages Of Players and Performance in Italian Serie A.

Abstract

This paper investigated the relationship between players’ wages and sport performance in the Italian top professional football league - Serie A. The analysis focused on 14 seasons from 2001/2002 to 2014/2015. Findings show that aggregate wage expenditure is a robust predictor of success for Italian professional football teams. We first exploited a fixed-effects panel data and eventually we have addressed the problem of endogeneity by providing a dynamic IV specification of the model. Based on the System-GMM framework, we employed a model including lagged terms of dependent variables and covariates as instruments to control for endogeneity as well as alternative exogenous instruments to control for geographical/environmental factors and for socio-economic factors that could be the actual predictors of performance through an indirect effect on payroll.

• Item Type: MPRA Paper
• Language: English
• Keywords: Italian serie A, football, soccer, talent, wages, sport performance
• Subjects: J - Labor and Demographic Economics > J4 - Particular Labor Markets > J40 - General; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J49 - Other; L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z19 - Other

References

Arellano, M. and S. Bond (1991), ‘Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations’, Review of Economic Studies 58(2), 277-297.

Baroncelli, A. and R. Caruso (2011), ‘The organization and economics of Italian Serie A: a brief overall view’, Rivista di Diritto ed Economia dello Sport 7(2), 67-85.

Berri, D. J. and M. B. Schmidt (2010), Stumbling on wins: two economists expose the pitfalls on the road to victory in professional sports, FT Press, Upper Saddle River (NJ).

Bucciol, A., N.J. Foss, and M. Piovesan (2014). Pay Dispersion and Performance in Teams. Plos One, 9(11), pp. 1-16.

Buraimo, B., G. Migali and R. Simmons (2014), ‘An analysis of consumer response to corruption: Italy’s Calciopoli scandal’, Lancaster University Economics Working Paper Series 006, 1-26.

Burger, J. D. and S. J. K. Walters (2003), ‘Market size, pay and performance. A general model and application to Major League Baseball’, Journal of Sports Economics 4(2), 108-125.

Caruso R., (2011), Crime and Sport Participation, Evidence from Italian regions over the period 1997-2003, Journal of Socio-Economics, 40(5), 455-463

Di Betta, P. and C. C. Amenta (2010), ‘A die-hard aristocracy: competitive balance in Italian soccer, 1929-2009’, Rivista di Diritto ed Economia dello Sport 6(2), 13-39.

Driscoll, J. C. and A. C. Kraay (1998), ‘Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data’, Review of Economics and Statistics 80(4), 549-560.

El-Hodiri, M. and J. Quirk (1971), ‘An economic model of a professional sports league’, Journal of Political Economy 79(6), 1302-1319.

Forrest, D. and R. Simmons (2002), ‘Team salaries and playing success: a comparative perspective’, Zeitschrift für Betriebswirtschaft, Ergänzungsheft 4(72), 221-237.

Fort, R. and J. Quirk (1995), ‘Cross-subsidization, incentives, and outcomes in professional team sports leagues’, Journal of Economic Literature 33(3), 1265-1299.

Franck, E., and Nüesch, S. (2010), ‘The effect of talent disparity on team productivity in soccer’, Journal of Economic Psychology, 31, 218-229.

Franck, E., and Nüesch, S. (2011), ‘The effect of wage dispersion on team outcome and the way the outcome is produced’, Applied Economics, 43(23), 3037–3049.

Frick, B. (2007), ‘The football players labour market: empirical evidence from the major European leagues’, Scottish Journal of Political Economy 54(3), 422-446.

Frick, B. (2013), ‘Team wage bills and sporting performance: evidence from (minor and major) European football leagues’, in: Rodríguez, P., S. Késenne and J. García (eds.), The Econometrics of Sport, Edward Elgar, Cheltenham (UK).

Hall, S., S. Szymanski and A. S. Zimbalist (2002), ‘Testing causality between team performance and payroll. The cases of Major League Baseball and English soccer’, Journal of Sports Economics 3(2), 149-168.

Késenne, S. (2000), ‘Revenue sharing and competitive balance in professional team sports’, Journal of Sports Economics 1(1), 56-65.

Nickell, S. (1981), ‘Biases in dynamic models with fixed effects’, Econometrica 49(6), 1417-1426.

Rodríguez, P., S. Késenne and J. García (2013), The Econometrics of Sport, Edward Elgar, Cheltenham (UK).

Scully, G. (1974), ‘Pay and performance in Major League Baseball’, American Economic Review 64(6), 915-930.

Simmons, R. and D. Forrest (2004), ‘Buying success: team performance and wage bills in U.S. and European sports leagues’, in: Fort, R. and J. Fizel (eds.), International Sports Economics Comparisons, Praeger, Westport (CT).

Szymanski, S. and S. Késenne (2004), ‘Competitive balance and gate revenue sharing in team sports’, Journal of Industrial Economics 52(1), 165-177.

Szymanski, S. and R. Smith (1997), ‘The English football industry: profit, performance and industrial structure’, International Review of Applied Economics 11(1), 135-153.

Szymanski, S. (2004), ‘La relazione competitive tra posizione competitiva e posizione reddituale: quali sono le squadre migliori?’, in: Lago, U., Baroncelli, A. and S. Szymanski (eds.) Il business del calcio. Successi sportivi e rovesci finanziari, EGEA, Milano.

Szymanski, S. (2013), ‘Wages, transfers and variation of team performance in the English Premier League’, in: Rodríguez, P., S. Késenne and J. García (2013), The Econometrics of Sport, Edward Elgar, Cheltenham (UK).

Vrooman, J. (1995), ‘A general theory of professional sports league’, Southern Economic Journal 61, 971-990.

Yamamura, E. (2015), Wage disparity and team performance in the process of industrial development: evidence from Japan’s Professional Football League, Journal of Sports Economics 16(2), 214-223.