Abstract
We assess the proclaimed pro-competitive effects of the “transfer system”, the no-poaching agreement governing the European football (soccer) labor market. A major argument to legitimize this system is that transfer fees, which hiring clubs pay to release players from their current clubs, redistribute revenues from large market to small market clubs. This would strengthen small clubs’ financial clout and their ability to compete in sporting terms. Player transfer fees represent over 10 billion Euros in asset value in the financial statements of the 202 clubs we analyze. Still, small market clubs rarely obtain substantial revenues from the transfer market. The main beneficiaries are clubs around the middle of the market size distribution. A select group of large market clubs makes significant transfer losses, but this does not undo their initial financial advantage. Overall, the transfer system therefore leads to a very minor reduction in revenue inequality.
Highlights
In 2002, the European Commission and FIFA, football’s worldwide governing body, agreed on a set of regulations to govern the labor market of European football players (European Commission, 2002)
Known as the “transfer system”, a player is held to his temporary employment contract with a club unless a rival club or the player himself pays a release clause, which is typically much higher than the economic value of the remaining term of the contract
Looking at all European clubs combined, we find that the transfer system redistributes very little revenue from large to small market clubs
Summary
In 2002, the European Commission and FIFA, football’s worldwide governing body, agreed on a set of regulations to govern the labor market of European football (soccer) players (European Commission, 2002) Under this regulation, known as the “transfer system”, a player is held to his temporary employment contract with a club unless a rival club or the player himself pays a release clause, which is typically much higher than the economic value of the remaining term of the contract. In reality players almost never break up their contract unilaterally because they lack the financial resources to do so Instead, they are forced to wait for a rival club to poach them if they desire to end their current employment. Current employees are recognized as commodities which may turn a profit for employers in future trade
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