Football Economics and Policy by Stefan Szymanski (auth.)

By Stefan Szymanski (auth.)

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Mike Bateson, chairman of Torquay United, rooted to the foot of the Third Division. To examine in more detail whether these views have any foundation in fact, this chapter will start by describing the formal rule changes that are anticipated. The following section will provide an historical overview of the structure of the English Football Leagues, and Section 4 will consider the main economic forces which drive the structure and conduct of the English football industry. Section 5 will then analyse both the short-run and the long-run effects of Bosman in the light of “industry conditions” as well as looking at some data from which we can evaluate the initial impact.

Revenue also depends on performance in cup competitions since this generates extra games as well as (more speculatively) increased support for the club as a whole. We collected data on the number of rounds played in each year by each club in each of the FA Cup, The League Cup (variously known as the Milk Cup, the Rumbelows Cup and now the Coca-Cola Cup), and the various European club competitions, the European Cup, The UEFA Cup and the European Cup Winners’ Cup. The variable CUP is the total number of games played in any of these cups.

The fixed-effect estimator is inconsistent (N going to infinity, fixed T) when lagged dependent variables are included. But the bias declines quite rapidly with T, and the fact that the fixed-effect and RCM estimates are so similar confirms that this is not a problem. Neither the random-effect nor the cross-section estimator would be appropriate in this case, since the effects are almost certainly correlated with the regressors: for instance, the intercept in the quality equation will determine the optimal expenditure on wages, which is the regressor in that equation.

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