Economic Consequences of Transfer Fee Regulations in European Football

Abstract

We discuss the effects of three different transfer fee systems in European football on contract lengths, wages, profits, education incentives and the number of talents being educated. The different regimes, being used until the Bosman judgement of 1995, currently in use, and recently proposed by the European Commission differ with respect to the transfer fee an initial club must accept in case of a transfer depending on whether a player has a valid contract or not. In particular, we argue that due to its averse effects on investment incentives, the Commission should refrain from its Suggestion of abolishing freely negotiable transfer fees. Our analysis also sheds some light on the issue under which circumstances binding long-term contracts should be allowed in general labor law.