Protectionism, Competitiveness and Inequality: Cross-Country Evidence from Soccer

Abstract

Using club-level data on domestic-league and international points from 73 countries, this paper achieves a policy evaluation of country-specific regulations regarding soccer success. The results show that restrictions on foreign direct investment reduce the international competitiveness of clubs, whereas restrictions on international migration policies have no significant impact on it. Domestic inequality across clubs increases with restrictions on a minimum number of home-grown players, while it goes down with restrictions on foreign direct investment or restrictions on a maximum number of foreign players. The results are robust to the consideration of other domestic regulations, market value of clubs or number of matches played.

Keywords:

• Protectionism
• soccer success
• competitiveness
• migration
• cross-country analysis

JEL Classifications:

• F21
• F22
• Z28

Acknowledgments

The author would like to thank the editor Sunghyun Henry Kim and two anonymous referees for their helpful comments and suggestions. The author is also grateful for the Kimberly Green Faculty Fellowship and the Steven J. Green School of International and Public Affairs for their continuous support.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 See https://www.theguardian.com/football/blog/2019/mar/25/foreigners-england-potential-youngsters for more details.

2 See https://www.reuters.com/article/soccer-turkey-debt/update-1-soccer-turkeys-banking-association-says-will-restructure-club-debts-idUSL8N1Z71EG fore more details.

3 See https://ussoccerplayers.com/2017/04/foreign-ownership-in-europe-football-soccer.html for more details.

4 See https://www.espn.com/soccer/german-bundesliga/10/blog/post/3412475/what-would-happen-if-bundesliga-clubs-scrapped-50+1-ownership-rule and https://www.goal.com/en-us/news/premier-league-home-grown-players-rule-how-does-it-work/1mww3y06t775v1a7c6139l53ji for more details.

5 Soccer clubs play with each other both domestically and internationally. While the domestic competition is achieved in the corresponding domestic leagues, international competitions are achieved through international organizations such as the Union of European Football Associations (UEFA).

6 It is important to emphasize that the latter two restrictions can have alternative meanings based on their scale. In particular, according to the data used in this paper, given that there is a restriction in a country, the maximum number of foreign players is restricted to about 6, whereas the minimum number of home-grown players is restricted to about 8 both on average across countries. Hence, for a given squad size of, say, 20, the restriction on a minimum number of home-grown players corresponds to having at most 12 foreign players, which is double the restriction on the maximum number of foreign players, on average across countries.

7 Regarding the effects of international migration on national-team performance, see studies such as by Baur and Lehmann (2007) have shown that having more foreign players is associated with better national-team success.

8 See studies such as by Gásquez and Royuela (2016) who discuss the advantages of using Elo rating scores over other official scores.

9 The number of matches in the domestic league is a control variable as it determines the total number of available points and thus competitiveness/inequality may be affected by this scale factor. The number of matches in the domestic league also controls for the potential improvement in the quality of soccer played (through learning by doing). The possibility of an injury or tiredness of players may also be affected by the number of matches in the domestic league.

10 This inequality measure has been preferred mostly to include the control variable of the market value of soccer clubs in estimations as it is an important determinant of inequality.

11 Country points were not included as control variables in regressions based on the international competitiveness (represented by Equation (1(1) $\underset{\mathrm{International}\mathrm{Points}}{\underbrace{P_i^j}}=\underset{\mathrm{Protectionist}\mathrm{Policies}}{\underbrace{\sum _{n=1}^3{\alpha }_n{\tau }_{in}}}+\underset{\mathrm{Domestic}\mathrm{Regulations}}{\underbrace{\sum _{m=1}^5{\beta }_m{d}_{im}}}+\underset{\mathrm{Control}\mathrm{Variables}}{\underbrace{\sum _{s=1}^2{\gamma }_s{c}_{is}^j}}$(1) )) as they are mostly determined by international points of country-specific soccer clubs in the first place.

12 This threshold value of $MH{P}_i$ is calculated by using: $\frac{\mathrm{\partial }{P}_i^j}{\mathrm{\partial }MH{P}_i}={\alpha }_4+2{\alpha }_{5}MH{P}_i=0$where ${\alpha }_4$ and ${\alpha }_5$ are estimated coefficients.

13 This threshold value of $MF{P}_i$ is calculated by using: $\frac{\mathrm{\partial }{G}_i^{jk}}{\mathrm{\partial }MF{P}_i}={\alpha }_2+2{\alpha }_{3}MF{P}_i=0$where ${\alpha }_2$ and ${\alpha }_3$ are estimated coefficients.

Additional information

Notes on contributors

Hakan Yilmazkuday

Hakan Yilmazkuday is a professor of economics at Florida International University. His research focuses on international economics, regional economics, macroeconomics, together with growth and development.