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Do high wage footballers play for high wage teams? The case of Major League Soccer

Author

Listed:
  • Rachel Scarfe

    () (School of Economics, University of Edinburgh)

  • Carl Singleton

    () (Department of Economics, University of Reading)

  • Paul Telemo

    () (School of Economics, University of Edinburgh)

Abstract

Intuition and sports knowledge suggest the most talented professional footballers play for the best teams, i.e. positive assortative matching based on productivity. We consider Major League Soccer between 2007 and 2017. We estimate a wage equation, finding that player and team fixed wage premiums are negatively correlated. This is a puzzle, especially because our estimates of players' wage premiums do correlate strongly with measures of their performance on the pitch, and there is evidence of teammate sorting. One potential solution to this puzzle would be that players match to teams according to some sort of compensating wage differential, for example from their desire to play for successful or well-supported teams; the estimated wage premiums of MLS teams are highly and negatively correlated with their success in the league and their home game attendances.

Suggested Citation

  • Rachel Scarfe & Carl Singleton & Paul Telemo, 2019. "Do high wage footballers play for high wage teams? The case of Major League Soccer," Economics & Management Discussion Papers em-dp2019-04, Henley Business School, Reading University.
  • Handle: RePEc:rdg:emxxdp:em-dp2019-04
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    File URL: http://www.reading.ac.uk/web/FILES/economics/emdp201904.pdf
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    References listed on IDEAS

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    1. David Card & Ana Rute Cardoso & Joerg Heining & Patrick Kline, 2018. "Firms and Labor Market Inequality: Evidence and Some Theory," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 13-70.
    2. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    3. Andrews, M.J. & Gill, L. & Schank, T. & Upward, R., 2012. "High wage workers match with high wage firms: Clear evidence of the effects of limited mobility bias," Economics Letters, Elsevier, vol. 117(3), pages 824-827.
    4. Jan Eeckhout & Philipp Kircher, 2011. "Identifying Sorting--In Theory," Review of Economic Studies, Oxford University Press, vol. 78(3), pages 872-906.
    5. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    6. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
    7. Todd H. Kuethe & Mesbah Motamed, 2010. "Returns to Stardom: Evidence From U.S. Major League Soccer," Journal of Sports Economics, , vol. 11(5), pages 567-579, October.
    8. M. J. Andrews & L. Gill & T. Schank & R. Upward, 2008. "High wage workers and low wage firms: negative assortative matching or limited mobility bias?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 673-697, June.
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    More about this item

    Keywords

    firm-specific wages; AKM wage equation; matching; superstar pay;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J49 - Labor and Demographic Economics - - Particular Labor Markets - - - Other
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues

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