Soccer labour market equilibrium and efficient training of players

Abstract

This paper develops a two-period model of the soccer labour market. The first period is devoted to the selection of players and training, while the second period corresponds to the beginning of the players’ professional career. Between the two periods, players can be hit by idiosyncratic shocks, thus generating mismatches between players and clubs. Some players are transferred in exchange for the payment of a transfer fee by the poaching club to the training club, while others may renegotiate their wages. Our model emphasises the key allocation role played by transfer fees: a training club may benefit from training, even if the player moves to another club at the end of the training period. Using the simulated method of moments, we estimate the impact of transfer fees on training, capitalising on an original data set on the Big-5 European soccer leagues. We show that the presence of transfer fees allows the selection and training of players to get closer to the efficient allocation. Counterfactual experiments then highlight that a significant share of players would not have been trained in the absence of transfer fees.