MAINTAINING MARKET POSITION: TEAM PERFORMANCE, REVENUE AND WAGE EXPENDITURE IN THE ENGLISH PREMIER LEAGUE
Article first published online: 31 AUG 2010
© 2010 The Authors. Bulletin of Economic Research © 2010 Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
Bulletin of Economic Research
Volume 63, Issue 4, pages 464–497, October 2011
How to Cite
Carmichael, F., McHale, I. and Thomas, D. (2011), MAINTAINING MARKET POSITION: TEAM PERFORMANCE, REVENUE AND WAGE EXPENDITURE IN THE ENGLISH PREMIER LEAGUE. Bulletin of Economic Research, 63: 464–497. doi: 10.1111/j.1467-8586.2009.00340.x
- Issue published online: 27 SEP 2011
- Article first published online: 31 AUG 2010
- competitive balance;
- hedonic wages;
- human capital investment;
- production functions;
- team sports
This paper investigates the relationship between playing success and commercial success in team sports. Utilizing a data set relating to the English Premier League that combines both financial measures and indicators of playing skills and performances, our empirical analysis is based on three behavioural equations. Our analysis indicates that on-field success can be directly related to players’ skills and abilities and that revenue is positively related to on-field success. Wage expenditure is also shown to systematically reflect player skills and performances. One interpretation of this evidence is that investment in players’ skills and ability buys on-field success, with richer teams becoming ever richer and able to maintain or even build upon success by spending more on players than less successful clubs. To the extent that richer clubs are successful in their objective there is a causal link between revenue earned and competitive imbalance via investments in players. The implications of this tendency within a league are discussed in our conclusion, which also considers the potentially wider implications of our study as they relate to the evolution of firm size and issues of market share.