The Economics of Long‐Term Contracts in the Footballers' Labour Market

17 Pages Posted: 14 Jan 2015

See all articles by Babatunde Buraimo

Babatunde Buraimo

University of Liverpool - Management School (ULMS)

Bernd Frick

University of Paderborn - Faculty of Business Administration, Economics and Business Computing

Michael Hickfang

University of Paderborn

Rob W. Simmons

Lancaster University

Date Written: February 2015

Abstract

Peter Sloane's seminal article in this journal on the objectives of football clubs argued that utility maximising clubs would seek out player talent more aggressively than profit maximising clubs and that this accumulation of player talent by larger teams might need to be checked by redistribution of revenues. We suggest in this article that, in a context of rising revenues and high rewards, the pressures to acquire more and better talent so as to out‐perform other teams on the football pitch leads to a requirement for teams to practise effective contract management. Using a large dataset from the German Bundesliga, we find that players with longer term contracts perform better, ceteris paribus. Hence, selection effects in the award of long‐term contracts dominate moral hazard (shirking) effects in the Bundesliga.

Suggested Citation

Buraimo, Babatunde and Frick, Bernd and Hickfang, Michael and Simmons, Rob W., The Economics of Long‐Term Contracts in the Footballers' Labour Market (February 2015). Scottish Journal of Political Economy, Vol. 62, Issue 1, pp. 8-24, 2015, Available at SSRN: https://ssrn.com/abstract=2549351 or http://dx.doi.org/10.1111/sjpe.12064

Babatunde Buraimo (Contact Author)

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

Bernd Frick

University of Paderborn - Faculty of Business Administration, Economics and Business Computing ( email )

Warburger Str. 100
D-33098 Paderborn
Germany

Michael Hickfang

University of Paderborn

Warburger Str. 100
Paderborn, D-33098
Germany

Rob W. Simmons

Lancaster University ( email )

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