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Handling heteroskedasticity in labour demand functions of athletes

Author

Listed:
  • Rappai Gábor

    (Department of Economics and Econometrics, Faculty of Business and Economics, University of Pécs, Pécs, Hungary)

  • Fűrész Diána Ivett

    (PhD Student, University of Pécs, Pécs, Hungary)

Abstract

Based on previous research it can be stated that modelling sport economics related demand curves (e.g. demand for sport events and athletes) is different from other types of modelling. The difference lies in the fact that some parts of the demand curves are nearly horizontal in case of sport goods and nearly vertical in case of athletes, because the price of sport events is inflexible and at the same time, salaries of top athletes are extremely flexible. This study investigates parameter estimation methods appropriate for the relevant demand functions of sport economics. In this cases the generally used ordinary least squares estimator is less robust, so the weighted least squares estimators are able to handle heteroskedasticity. If the distribution of the variables is known, the Newey-West heteroscedasticity corrected estimates give even stronger results. The empirical study analyses footballer transfer fees in top European leagues and identifies a threshold at which the traditional supply-demand functions are not appropriate. According to the results, word class athletes, in a way, can be considered prestige goods for which demand may be irrational.

Suggested Citation

  • Rappai Gábor & Fűrész Diána Ivett, 2018. "Handling heteroskedasticity in labour demand functions of athletes," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 4(2), pages 47-56, November.
    • Handle: RePEc:vrs:crebss:v:4:y:2018:i:2:p:47-56:n:6
    DOI: 10.2478/crebss-2018-0012
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    References listed on IDEAS

    as
    1. Wladimir Andreff & Stefan Szymanski (ed.), 2006. "Handbook on the Economics of Sport," Books, Edward Elgar Publishing, number 3274.
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    7. Sloane, Peter J., 2006. "Rottenberg and the Economics of Sport after 50 Years: An Evaluation," IZA Discussion Papers 2175, Institute of Labor Economics (IZA).
    8. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
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    More about this item

    Keywords

    demand curves; football market transfers; robust estimation methods; sports economy;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues

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