Extreme Wages, Performance and Superstars in a Market for Footballers

Industrial Relations: A Journal of Economy and Society, 60(1): 84-118. (2021). https://doi.org/10.1111/irel.12270

47 Pages Posted: 11 May 2020 Last revised: 8 Mar 2021

See all articles by Rachel Scarfe

Rachel Scarfe

University of Edinburgh

Carl Singleton

Department of Economics, University of Reading

Paul Telemo

University of Edinburgh

Date Written: March 31, 2020

Abstract

We study the determinants of superstar wage effects, asking whether productivity or popularity-based explanations are more appropriate. We use longitudinal wage and performance data for workers (players) and firms (teams) from a particular market for sports talent: Major League Soccer (MLS) in the United States. We find evidence that the top earners, whose annual salaries are mostly not accounted for by their past MLS performances, when compared alongside other footballers, are paid more because they attract significantly higher stadium attendances and thus revenues. There is no evidence that higher residual salary spending by the teams affects their relative performance in football terms, or that the amounts the teams spend on actual talent affect attendances. Taken together, these results suggest that a popularity-based explanation of superstar wage effects is appropriate among the top earners in this labour market.

Keywords: Superstar effects, Top incomes, Labour productivity, Major League Soccer

JEL Classification: D31, J24, J31, L83, Z22

Suggested Citation

Scarfe, Rachel and Singleton, Carl and Telemo, Paul, Extreme Wages, Performance and Superstars in a Market for Footballers (March 31, 2020). Industrial Relations: A Journal of Economy and Society, 60(1): 84-118. (2021). https://doi.org/10.1111/irel.12270, Available at SSRN: https://ssrn.com/abstract=3577114 or http://dx.doi.org/10.2139/ssrn.3577114

Rachel Scarfe

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

Carl Singleton (Contact Author)

Department of Economics, University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Paul Telemo

University of Edinburgh ( email )

Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom

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