Economics & Soccer: Globalization

Bosman Ruling

Free movement of players and differentiation in tax laws led to...

Behavior and Incentives in Economics: The Case of Soccer

• $7.75 million (1990) - $425 million (2018 & 2022) world cups
• US market still growing

• Soccer is clearly a global topic that is only furthered through the usage of social media

In Conclusion:

Betting industry

Is Globalization of Futbol Good?

Media

• Soccer first hit television screens in 1937
• Today television rights to European football as a whole are estimated to be worth over $2 billion annually

Influence on:

internet

• Media
• Player movement
• Capital

Globalization of Futbol (Soccer)

Capital

• instant information leads to a more informed and much larger sports betting industry
• On site betting
• Websites
• Combining a growing US market with the betting industry can lead to a very large betting industry
• Legal and illegal

• Bargaining power between players and clubs
• More unequal distribution between players' salaries
• Wealthier clubs would gain advantage overtime

Khelsey Silberhorn

Billy Kruse

Gabby Dieter

Influence of Foreign Capital

• increased due to soccer globalization
• more opportunities to invest in the industry

English Premiership League

On the other hand...

Club Commercialization

Clear segmentation between rich and poor clubs

National Teams:

• money became an incentive for players
• talent became progressively concentrated among the wealthiest teams

• strict rules of non-mobility
• not a significant source of commercialization
• talent more equally distributed
• money not a factor

Abramovich's buyout of Chelsea in 2003

Questions??

"Leg Drain"

Comparing club teams to National teams

Labor Mobility

• Increased inequality
• Commercialization
• Money amplified

Before:

Clubs

• limited mobility of players
• 2-3 foreign players allowed
• community organizations
• Strictly European

*quality of club and national team coincides

National Teams

• No player mobility
• best teams generated from places with best clubs

(Italy, Spain,England, etc.)

• best players from largest soccer countries

Bosman- Belgian player sued his club (FC Liege), Belgian Soccer Association & European Soccer Asociation (UEFA) for preventing his transfer into a French club.....1995

Result:

Argument:

Transfer rules and nationality clauses did not comply with free movement of workers (Treaty of Rome)

Opportunity for free movement of players

(only within European Union)

...Teams at liberty to choose # of foreigners

Changes....

Nationally

Poor teams benefit greatly....

Example:

Ivory Coast

Clubs

Initially Stronger teams gain even better skills and more money...in turn, best players

Key players train

and play for European Clubs, bring back newly developed skills...at expense of clubs (Arsenal,Roma, Manchester, Chelsea, etc.)

Quality of game increases, and in more concentrated manner among clubs

Teams become more equal

Best competition stays among same top teams year after year.

The # of teams who make quarter-finals becomes more concentrated year after year.

After Bosman Rule:

Taxation Laws

Preferential Tax Laws

• Location choice of players coincided with tax reforms for foreigners
• Some countries aimed taxation laws to entice top soccer players

*Spain- The "Beckham Law"

1958–1962 1963–1967 1968–1972 1973–1977 1978–1982 1983–1987 1988–1992 1993–1997 1998–2002

30 26 28 28 30 29 26 26 22

65.9 73.5 68.1 70.0 64.3 62.2 70.2 72.0 76.9

Concentration of winning teams in the League of Champions within each five-year period

Christiano Ronaldo

Manchaster United to Real Madrid in 2009

• avoided 50% tax rate in UK
• 24% rate foreign residence in Spain instead

Concentration

coefficient (Gini)

Number of teams

who have

qualified for the

quarterfinals

The "Beckham Law"

-special tax scheme passed in 2005 that applies to all foreign workers acquiring residence in Spain

-option to be taxed a flat rate instead of the regular progressive individual income tax

• foreign players in Spanish League increased ~50%