Do High Wage Footballers Play for High Wage Teams? The case of Major League Soccer

Abstract

Intuition and sports knowledge suggest the most talented professional footballers play for the best teams, i.e. positive assortative matching based on productivity. We consider Major League Soccer between 2007 and 2017. We estimate a wage equation, finding that player and team fixed wage premiums are negatively correlated. This is a puzzle, especially because our estimates of players' wage premiums do correlate strongly with measures of their performance on the pitch, and there is evidence of teammate sorting. One potential solution to this puzzle would be that players match to teams according to some sort of compensating wage differential, for example from their desire to play for successful or well-supported teams; the estimated wage premiums of MLS teams are highly and negatively correlated with their success in the league and their home game attendances.

Keywords: firm-specific wages, AKM wage equation, matching, superstar pay

JEL Classification: J31, J49, Z22