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Performance, Salaries and Contract Length: Empirical Evidence from German Soccer

Author

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  • Bernd Frick

    () (University of Paderborn)

Abstract

The recent transfers of Christiano Ronaldo from Manchester United, and of Ricardo Izecson dos Santos Leite (Kaká) from Associazione Calcio Milan to Real Madrid—as well as the increasing financial problems of many of the top teams in the big five European leagues—have again increased the public’s attention for the global football players’ labor market. Therefore, the paper addresses two important, and highly contested, issues: player remuneration and contract duration (players are usually considered as overpaid and poorly motivated. Using two different unbalanced panels from the German Bundesliga league that cover six and 13 consecutive seasons respectively (1997-98 to 2002-03 and 1995-96 to 2007-08), I show, first, that the variance in player salaries can be explained, to a large extent, by the variance in individual performance. That is, salaries can be explained by career games played and games played last season, previous and recent international appearances, and goals scored. Moreover, player position, leadership skills, and region of birth clearly matter as well. The impact of these characteristics varies across the salary distribution. Second, I find robust evidence that player performance—measured primarily, but not exclusively, by a subjective overall player rating from Kicker, a highly respected soccer magazine—significantly increases in the last year of the contract. In addition, the variance in player performance is significantly lower in the last year of the contract. These findings suggest that moral hazard is a widespread phenomenon, even in professional soccer.

Suggested Citation

  • Bernd Frick, 2011. "Performance, Salaries and Contract Length: Empirical Evidence from German Soccer," International Journal of Sport Finance, Fitness Information Technology, vol. 6(2), pages 87-118, May.
  • Handle: RePEc:jsf:intjsf:v:6:y:2011:i:2:p:87-118
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    Citations

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    Cited by:

    1. Colin Green & Fernando Lozano & Rob Simmons, 2015. "Rank-Order Tournaments, Probability of Winning and Investing in Talent: Evidence from Champions' League Qualifying Rules," National Institute Economic Review, National Institute of Economic and Social Research, vol. 232(1), pages 30-40, May.
    2. repec:bla:ecinqu:v:55:y:2017:i:4:p:1759-1770 is not listed on IDEAS
    3. David J. Berri & Brad R. Humphreys & Robert Simmons, 2013. "Valuing the blind side: pay and performance of offensive linemen in the National Football League," Chapters,in: The Econometrics of Sport, chapter 6, pages 99-114 Edward Elgar Publishing.
    4. Bernd Frick, 2013. "Team wage bills and sporting performance: evidence from (major and minor) European football leagues," Chapters,in: The Econometrics of Sport, chapter 4, pages 63-80 Edward Elgar Publishing.
    5. Alex Bryson & Giambattista Rossi & Rob Simmons, 2014. "The Migrant Wage Premium in Professional Football: A Superstar Effect?," Kyklos, Wiley Blackwell, vol. 67(1), pages 12-28, February.
    6. Bernd Frick & Rob Simmons, 2014. "The footballers’ labour market after the Bosman ruling," Chapters,in: Handbook on the Economics of Professional Football, chapter 13, pages 203-226 Edward Elgar Publishing.
    7. repec:eee:ejores:v:263:y:2017:i:2:p:611-624 is not listed on IDEAS
    8. Herm, Steffen & Callsen-Bracker, Hans-Markus & Kreis, Henning, 2014. "When the crowd evaluates soccer players’ market values: Accuracy and evaluation attributes of an online community," Sport Management Review, Elsevier, vol. 17(4), pages 484-492.
    9. Jeffrey Chu & Saralees Nadarajah & Emmanuel Afuecheta & Stephen Chan & Ying Xu, 2014. "A statistical study of racism in English football," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2915-2937, September.

    More about this item

    Keywords

    salaries; contract duration; pay determination; moral hazard; soccer;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. User:JonathanStone/Football Economics: A comparative analysis of player wages and salaries between the elite football leagues in Wikiversity English ne '')

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