\cite{Gardiner_2011} Team Performance: The Case of English Premiership Football
Introduction
The English Premier League (EPL) is considered by many to be the world's most competitive and prestigious professional football league. Comprised of 20 teams and over 500 players, the Premier League hosts some of the best players of our generation as well as the greatest players of generations past. These players do not come without a price. The Premier League is by far the richest league in football, with its 5 most valuable clubs by player value landing in the list of top 10 most valuable clubs in the world-- and this trend is only increasing. The 2017/2018 current season of premier league clubs amass a total market value of $5.793 billion (Transfermarkt) across its 522 players, marking an increase of over $1 billion from last year's $4.826 billion.
This value is spread unequally throughout the individual players, with stars costing as much as 70 million, while the bottom of the roster dips to 100 thousand. The value placed on performance and ability to bring home championships leading to sponsorships and ticket sales leads teams to pay these astronomical prices for players. Recently, the most expensive transfer in history was made, with Neymar Jr. being bought by Paris-Saint Germaine for a transfer fee of $263 million. Surely such a price can't translate into a proportional increase in goals scored? The reality is probably more close to a situation where Neymar Jr. contributes not only on the field, but also on the revenue sheet. The odd duality of football clubs as performance-based entities and as lucrative businesses creates a very interesting pricing environment for the players who form the teams.
The Premier League is notoriously British. However, despite the rich tradition of football in England, historically around two-thirds of the players over the past several seasons have not been English. In the 2016/2017 season, the season our data covers, 165 English players took the field alongside 337 foreign players for a total of 502 players. Constituting approximately 32% of the EPL, English players show up at an average rate of just over 8 players per team, barely meeting the 8-player minimum for a squad of 25 established in 2010 as a part of the Homegrown Player Rule (Elliot, Weedon 2010). However, the total market value of these 165 players amounts to only $1.219 billion of the total $4.682 billion, or 25% of the total. It shouldn't surprise the reader that this is the case. The effect of a quota introduced into a market is bound to push the price down, but we will discuss this later on.
This paper examines this price effect in the English Premier League for the 2016/2017 season. Specifically, we will determine if there is a wage-premium for foreign players in the EPL, and determine if this premium is matched by skill. We first begin by running a basic bivariate regression with a dummy for English, then we move on to include a number of covariates indicative of performance (Goals, successful pass percentage, tackles, etc). In doing this, we hope to eliminate the omitted variable bias related to skill, resulting in the comparison of an equally skilled English player to his Non-English counterpart. After this, we attempt to simultaneously control for the quota imposed by the Homegrown initiative as well as the 'star factor' through trimming the highest and lowest 10th percentiles of market value. This eliminates the purchases that are likely only meant to fill quotas. (X many of the bottom 10% are English). Additionally, since we are interested in the fundamental question of value based on performance, eliminating the top 10% of players should eliminate those players who are likely to bring revenue through advertising deals and jersey sales.
Literature Review
Literature examining inequality in football has typically focused on inter-club inequality, which has increased steadily over time. However, this inequality hasn’t impacted fan attendance, and only intra-league competitive balance is shown to have significantly decreased (Szymanski 1999). The rise in intra-league inequality doesn't seem to affect our enjoyment football or the excitement of the game. In fact, Szymanski points out that our increased attachment to the sport is partly to blame, as television, advertisement, and a year-round array of tournaments and competitions bolster club revenues, perpetuating the practice of marginally better players being prices at two and three times their secondary tier \cite{szymanski2007}. John Williams (2007) substantiates this evolution of how we consume football, tracking the change from traditional associative fandom with consumer fandom—a major distinction being the entrance of large money interests into the sport.
As the game grew in financial reputation, scholars began to ask questions concerning the validity of such prices for players. Carmichael, Thomas, and Ward (2000) utilized new data, which included several ‘input’ statistics of high- and low-value players, to uncover any patterns that consistently produced winning teams \cite{Carmichael_2000}. Another analytical approach to evaluating football teams has focused on the duality of football clubs as businesses and sports teams. Simon Rottenberg pioneered this school of thought writing a non-regression oriented paper detailing behavior of teams as entities with a correlated dual-mandate of competition and financial success \cite{rottenburg2000}. While financial performance is necessary, sporting performance is what keeps a club's tradition and longevity. A fascinating study by Guzmán and Morrow utilized Data Envelopment Analysis (DEA), "a linear programming method used to evaluate the relative efficiency of a number of producers or decision-making units (DMUs), comparing the levels of inputs and outputs of one DMU with its competitors.” Typically use in banking or health insurance, the paper modifies the approach to evaluate the relative efficiency of EPL teams. Major findings show that, on average, EPL teams operate at 85% efficiency, but efficiency isn't always associated with performance. For he league’s 2nd, 3rd, and 5th best teams all scored lower than average on efficiency, but teams coming in 13th and 19th were among the highest \cite{Guzm_n_2007}.
Before the initiation of the Homegrown Player Rule in the premier league in 2010, FIFA, the governing body of international football, attempted to implement it's own version, entitled the 6+5 rule. This proposition stated that of the 11 players on the starting roster, 6 must be eligible to play for the club's parent nation \cite{dorlando2011}. Although 6+5 failed, it sparked much of the dialogue surrounding the fairness and effectiveness of a quota on foreign players.
Data
The data for this paper was constructed using data from whoscored.com and transfermarkt.com, public databases with a broad range of data for individual players, clubs, national teams, and more. Our regression utilizes data covering the 2015/2016 Premier League Season, and the unit of observation is the individual player. There are 502 observations in the data and the structure is cross-sectional. A large number of offensive, defensive, and passing statistics, which will be detailed later on, are taken from whoscored, with market value, player position, and national origin are supplemented by transfermarkt. I do not alter the data in any significant way, but the reader should note that 37 players have been excluded due to their not having a market value. This can be attributed mostly to youth, as these players haven’t been bought or sold yet.
Summary Statistics are listed in Table 1. The main outcome variable we are interested in is Market Value,