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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 that 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 positive teammate sorting. However, the estimated wage premiums of MLS teams are highly and negatively correlated with their success in the league and their home game attendances. This is consistent with an explanation whereby part of an MLS team's success comes from its ability to bargain down the price that it pays for talent.

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 Discussion Papers em-dp2019-04, Department of Economics, University of Reading, revised 01 Feb 2020.
    • Handle: RePEc:rdg:emxxdp:em-dp2019-04
    as

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    File URL: http://www.reading.ac.uk/web/FILES/economics/emdp201904.pdf
    File Function: Revised version, 2020
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    References listed on IDEAS

    as
    1. 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.
    2. Jan Eeckhout & Philipp Kircher, 2011. "Identifying Sorting--In Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(3), pages 872-906.
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    4. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    5. 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.
    6. 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..
    7. 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.
    8. 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.
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    Cited by:

    1. Rachel Scarfe & Carl Singleton & Adesola Sunmoni & Paul Telemo, 2024. "The age‐wage‐productivity puzzle: Evidence from the careers of top earners," Economic Inquiry, Western Economic Association International, vol. 62(2), pages 584-606, April.
    2. van Ours, Jan C. & Peeters, Thomas, 2022. "International Assortative Matching in the European Labor Market," CEPR Discussion Papers 17630, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    firm-specific wages; AKM wage equation; matching; superstar pay;
    All these keywords.

    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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