Relative wages, payroll structure and performance in soccer. Evidence from Italian Serie A (2007-2019)

This paper investigates the role of payroll and its distribution in determining the seasonal performances of Italian football teams playing in Serie A. The novelty of our investigation lies in the introduction of a new extent upon which to compute traditional measures of dispersion of payroll. We calculate the coefficient of variation on real wages, on corrected wages and on weighted wages, using players’ characteristics, so that the players’ own perceived differences are considered. This aids us in testing for the role of envy in determining the teams’ performances. We exploit a data set on Serie A from 2007 to 2019, exploring the wages of 1,509 players in different seasons, to produce 4,633 total observations. Since Serie A is an open league with seasonal relegations and promotions, we have unbalanced panel data derived from 220 observations of 35 teams over 11 seasons. We use the percentage of points achieved by teams and a measure associated to the position of the team (rank) at the end of the first round of each season as dependent variables, and then we employ panel data techniques to estimate fixed effect models. We find a statistically significant association of team performance with relative wages and with previous results, while the salary dispersion seems to have no effect on performances. Moreover, by restricting our sample to teams that have never been relegated, and so balancing the panel, our empirical investigation validates the cohesion theory, since more equally weighted wages are associated with better on-field performances.