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Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer

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Author Info
Feess, Eberhard (University of Aachen (RWTH))
Frick, Bernd (University of Witten-Herdecke and Institute of Labor Law and Industrial Relations, Trier)
Muehlheusser, Gerd () (University of Bern and IZA Bonn)
Abstract

We perform a theoretical and empirical analysis of the impact of transfer fee regulations on professional soccer in Europe. Based on a model on the interaction of moral hazard and heterogeneity, we show (i) how the regulations effect contract durations and wages, (ii) that contracting parties have an incentive to agree upon inefficiently long contracts, (iii) how these incentives vary with the legal system, and (iv) how the relationship between contract duration and performance also depends on the legal system. With one exception, all theoretical results are empirically confirmed using a comprehensive data set from the top German Soccer League ("Bundesliga").

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1180.

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Length: 47 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1180

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Related research
Keywords: Labor contracts; Bosman judgement; empirical contract theory;

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Find related papers by JEL classification:
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Chiappori, Pierre Andre & Salanie, Bernard, 2002. "Testing Contract Theory: A Survey of Some Recent Work," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June. [Downloadable!] (restricted)
  3. Peter A. Diamond & Eric Maskin, 1979. "An Equilibrium Analysis of Search and Breach of Contract, I: Steady States," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 282-316, Spring. [Downloadable!] (restricted)
  4. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  5. Peter Antonioni & John Cubbin, 2000. "The Bosman Ruling and the Emergence of a Single Market in Soccer Talent," European Journal of Law and Economics, Springer, vol. 9(2), pages 157-173, March. [Downloadable!] (restricted)
  6. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
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  7. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
  8. Daniel A. Ackerberg & Maristella Botticini, 1999. "Endogenous Matching and the Empirical Determinants of Contract Form," Papers 0096, Boston University - Industry Studies Programme.
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  9. Kahn, Lawrence M, 1993. "Free Agency, Long-Term Contracts and Compensation in Major League Baseball: Estimates from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 157-64, February. [Downloadable!] (restricted)
  10. Burguet, Roberto & Caminal, Ramón & Matutes, Carmen, 1999. "Golden Cages for Showy Birds: Optimal Switching Costs in Labour Markets," CEPR Discussion Papers 2070, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April. [Downloadable!] (restricted)
  12. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  13. Kathryn E. Spier & Michael D. Whinston, 1995. "On the Efficiency of Privately Stipulated Damages for Breach of Contract: Entry Barriers, Reliance, and Renegotiation," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 180-202, Summer. [Downloadable!] (restricted)
  14. Jaap H. Abbring & James J. Heckman & Pierre-André Chiappori & Jean Pinquet, 2003. "Adverse Selection and Moral Hazard In Insurance: Can Dynamic Data Help to Distinguish?," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 512-521, 04/05. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Helmut Dietl & Egon Franck & Markus Lang, 2006. "Why football players may benefit from the "shadow of the transfer system"," Working Papers 0062, University of Zurich, Institute for Strategy and Business Economics (ISU), revised 2007. [Downloadable!]
    Other versions:
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