Showing papers in "Scottish Journal of Political Economy in 2007"
TL;DR: The growing economic importance of professional football and the recent fundamental changes in the regulatory regime governing the football players' labor market together with the availability of detailed information on player salaries, transfer fees and contract lengths have convinced an increasing number of economists from all over Europe to devote their attention to the operation of that particular market as discussed by the authors.
Abstract: The growing economic importance of professional football and the recent fundamental changes in the regulatory regime governing the football players' labor market together with the availability of detailed information on player salaries, transfer fees and contract lengths have convinced an increasing number of economists from all over Europe to devote their attention to the operation of that particular market. The following paper reviews the available evidence on the various dimensions of that market (remuneration, transfers, contracts and mobility) and points out some promising directions for further research.
228 citations
TL;DR: In this paper, the invariance proposition is revisited with adaptations for win-maximizing sportsman owners facing an uncertain Champions League prize, and a thirty-team Super League is proposed based on the National Football League.
Abstract: European football is in a spiral of intra-league and inter-league polarization of talent and wealth. The invariance proposition is revisited with adaptations for win-maximizing sportsman owners facing an uncertain Champions League prize. Sportsman and champion effects have driven European football clubs to the edge of insolvency, and polarized competition throughout Europe. Revenue revolutions and financial crises of the Big Five leagues are examined and estimates of competitive balance are compared. The European Super League completes the open-market solution after Bosman. A thirty-team Super League is proposed based on the National Football League.
137 citations
TL;DR: In this paper, the consequences of the Bosman verdict in 1995 have freed the European player market while the product market was still nationally protected, and the authors tried to derive the consequences from this deviant evolution in the European sports industry.
Abstract: Most European industries have a history of gradually opening international markets, with growing international capital mobility and increasing free trade of goods and services. However, although labour markets have been officially deregulated as well, there is much less international mobility of labour, mainly due to cultural and social barriers. An apparent exception to the rule been the industry of professional team sports in Europe, where the Bosman verdict in 1995 has freed the European player market while the product market was still nationally protected. In this paper, we try to derive the consequences of this deviant evolution in the European sports industry, concentrating on the competitive balance within and between national leagues and on the player salary levels, using a simplified ‘two country–four team’ model with quadratic revenue functions.
91 citations
TL;DR: The authors present an overview of models of long-term self-enforcing labour contracts in which risk-sharing is the dominant motive for contractual solutions. But they do not consider the one-sided limited commitment problem, for which there exists a considerable amount of empirical support.
Abstract: We present an overview of models of long-term self-enforcing labour contracts in which risk-sharing is the dominant motive for contractual solutions. A base model is developed that is sufficiently general to encompass the two-agent problem central to most of the literature, including variable hours. We consider two-sided limited commitment and look at its implications for aggregate labour market variables. We consider the implications for empirical testing and the available empirical evidence. We also consider the one-sided limited commitment problem for which there exists a considerable amount of empirical support.
89 citations
TL;DR: The authors examined how game coverage, revenues, and competitive balance are affected by competition in commercial television and sales of rights and concluded that consumers are better off if television is competitive and leagues do not centralize rights sales.
Abstract: Television rights are the largest component of revenues for major sports in large, rich nations. Among these nations, the market structure for rights varies due to different competition policies toward sports and television. This essay examines how game coverage, revenues, and competitive balance are affected by competition in commercial television and sales of rights. It argues that consumers are better off if television is competitive and leagues do not centralize rights sales. We conclude that centralization of rights sales does not improve competitive balance or benefit financially weak teams. Finally, while digital telecommunications are making television competitive, ending centralization of sales by leagues requires policy intervention.
88 citations
TL;DR: In this paper, the authors present a dynamic labour demand model where they evaluate the impact of employment regulations on permanent and temporary employment and find evidence in support of the hypothesis that fixed-term contracts have been effective steppingstones to permanent jobs during the period under observation.
Abstract: We present a dynamic labour demand model where we evaluate the impact of employment regulations on permanent and temporary employment. We consider three different kinds of regulations, namely firing costs, hiring costs and a constraint on temporary contracts. These regulations differently affect the size and composition of employment. The theoretical results are interpreted and questioned on the basis of empirical evidence on the employment effects of the regulation reforms that occurred in the major European countries in the period 1983–1999. The empirical analysis is based on a new set of time‐varying indicators on permanent employment protection, fixed‐term contracts and temporary agency work regulations. We find evidence in support of the hypothesis that fixed‐term contracts have been effective stepping‐stones to permanent jobs during the period under observation. On the contrary, flexible temporary agency work regulations seem to induce a substitution of permanent with temporary contracts.
88 citations
TL;DR: In this paper, the impact of financial liberalisation on consumption in seven major industrial countries was investigated and the authors found a marked shift in behaviour, notably a decline in short-run income elasticities and a rise in short run wealth and interest rate elasticities.
Abstract: We estimate the impact of financial liberalisation on consumption in seven major industrial countries, and find a marked shift in behaviour, notably a decline in short-run income elasticities and a rise in short-run wealth and interest rate elasticities. A corollary is that consumption equations estimated over both pre- and post-liberalisation regimes may be misleading, and either a form of testing as presented here or a shortening of the sample period may be appropriate for accurate forecasting and simulation.
84 citations
TL;DR: In the most thorough study to date on wage cyclicality among job stayers, Devereux's (2001) analysis of men in the Panel Study of Income Dynamics (PSID) produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicallyity among hourly workers differs between two alternative wage measures as mentioned in this paper.
Abstract: In the most thorough study to date on wage cyclicality among job stayers, Devereux's (2001) analysis of men in the Panel Study of Income Dynamics (PSID) produced two puzzling findings: (1) the real wages of salaried workers are noncyclical, and (2) wage cyclicality among hourly workers differs between two alternative wage measures. We examine these puzzles with additional evidence from other sources. Devereux's finding of noncyclical real wages among salaried job stayers is not replicated in the National Longitudinal Survey of Youth (NLSY) data. The NLSY data, however, do corroborate his finding of a discrepancy for hourly workers between the cyclicality of the two alternative wage measures. Evidence from the PSID Validation Study contradicts Devereux's conjecture that the discrepancy might be due to a procyclical bias from measurement error in average hourly earnings. Evidence from the Bureau of Labor Statistics establishment survey supports his hypothesis that overtime work accounts for part (but not all) of the discrepancy. We conclude that job stayers' real average hourly earnings are substantially procyclical and that an important portion of that procyclicality probably is due to compensation beyond base wages.
61 citations
TL;DR: In this article, the relative importance of the spot market and implicit contracts in the determination of British real wages was investigated based on the methodology of Beaudry and DiNardo (1991).
Abstract: Based on the methodology of Beaudry and DiNardo (1991), this paper investigates the relative importance of the spot market and implicit contracts in the determination of British real wages. Empirical work is carried out separately for males and females with individual-level data taken from the New Earnings Survey Panel for the years 1976–2001. In contrast to previous studies that used North American data, the spot market is found to be more important than implicit contracts in determining real wages, although we do find some support for contracting effects. Further evidence is provided through the analysis of individual wage sequences. These suggest that the downwardly rigid wage sequences implied by implicit contracts with costless worker mobility are not prevalent in Britain.
46 citations
TL;DR: In this paper, the authors show that the way individual income data should be aggregated into an index of inequality in order to explain countries' growth performance is theory specific, and that the use of a wrong measure might obscure the inequality-growth relationship and that relative performance of different measures of inequality can be informative about the channel through which inequality influences economic growth.
Abstract: We show that the way individual income data should be aggregated into an index of inequality in order to explain countries' growth performance is theory specific. A simulation set-up shows that the use of a wrong measure might obscure the inequality-growth relationship and that the relative performance of different measures of inequality can be informative about the channel through which inequality influences economic growth.
40 citations
TL;DR: For example, this article found that the self-assessed well-being of Scots is lower than that of the English or Welsh, even after taking into account any differences in characteristics.
Abstract: On almost all measures of physical health, Scots fare worse than residents of any other region of the UK and often worse than the rest of Europe. Deaths from chronic liver disease and lung cancer are particularly prevalent in Scotland. The self-assessed well-being of Scots is lower than that of the English or Welsh, even after taking into account any differences in characteristics. Scots also suffer from higher levels of self-assessed depression or phobia, accidental death and suicide than those in other parts of Great Britain. This result is particularly driven by outcomes in Strathclyde and is consistent with the high scores for other measures of social deprivation in this area. On average, indicators of social capital in Scotland are no worse than in England or Wales. Detailed analysis within Scotland, however, shows that social capital indicators for the Strathclyde area are relatively low. We argue that these problems need to be directly targeted as they seem unlikely to be fixed by more indirect policies aimed at raising economic growth.
TL;DR: In this paper, the authors explore the determinants of such differences among countries on the path to European Union (EU) accession, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria.
Abstract: In recent years, fiscal performance in Central Europe has steadily deteriorated, in contrast to the improvement in the Baltics. This paper explores the determinants of such differences among countries on the path to European Union (EU) accession. Regression estimates suggest that economic and institutional fundamentals do not provide a full explanation. An alternative explanation lies in the political economy of the accession process, and a game-theoretic model illustrates why a country with a stronger bargaining position might have an incentive to deviate from convergence to the Maastricht criteria. The model generates alternative fiscal policy regimes – allowing for regime shifts – depending on country characteristics and EU policies.
TL;DR: In this paper, the relevance of the Coase Theorem to the analysis of sports leagues is considered, and empirical evidence from English football suggests that the bias is likely to be in favour of too much competitive balance.
Abstract: This chapter considers the relevance of the Coase Theorem to the analysis of sports leagues. It is widely believed that there exists an ideal competitive balance between teams in a sporting contest, and that without competitive restraints to redistribute resources championships will be too unbalanced. The chapter reviews the empirical evidence on this issue to date, and then examines a model where the outcome may be either too little or too much competitive balance. Empirical evidence from English football suggests that the bias is likely to be in favour of too much competitive balance. The implications for European football in general and the Champions League in particular are then discussed.
TL;DR: In this paper, the authors present evidence that real wage cyclicality can be a particularly heterogeneous parameter, depending on different worker characteristics and also on the specific stage of the business cycle.
Abstract: This paper presents evidence that real wage cyclicality can be a particularly heterogeneous parameter, depending on different worker characteristics and also on the specific stage of the business cycle. Using matched employer–employee panel data for Portugal covering the period 1986–2004, real wages are shown to be considerably more procyclical during recessions than during expansions, resulting in relatively moderate overall levels of cyclicality (about −0.6). However, most of the procyclicality during downturns is shown to be driven by the younger employees, as older workers appear to be insulated from the business cycle. Moreover, movers between firms typically display higher cyclicality than workers that stay in the same firm, regardless of whether the latter move or not between job levels. Most results also hold when considering basic wages instead of total wages, except that the procyclicality of movers during downturns is substantially higher.
TL;DR: This paper investigated the robustness of the previous results and examined whether there are important cross-sectional and demographic differences in wage cyclicality, finding that the wages of lower-income, younger, and less-educated workers exhibited greater procyclicality.
Abstract: Previous studies of real wage cyclicality have made only sparing use of the micro-data detail that is available in the Panel Study of Income Dynamics (PSID). The present paper brings to bear this additional detail to investigate the robustness of the previous results and to examine whether there are important cross-sectional and demographic differences in wage cyclicality. Although real wages were procyclical across the entire distribution of workers from 1967 to 1991, the wages of lower-income, younger, and less-educated workers exhibited greater procyclicality. However, workers' straight-time hourly pay rates have been acyclical, suggesting that more variable pay margins such as bonuses, overtime, late shift premia, and commissions have played a substantial if not primary role in generating procyclicality.
TL;DR: In this paper, three variants of the Joneses effect were nestled into an otherwise standard growth model, and it was shown that, at least if comparisons-in-mean predominate, rises in the mean skills level and in the exogenous skills variance increase both growth and inequality.
Abstract: A recent class of models on ‘keeping up with the Joneses’ suggests that comparison with the consumption of other individuals affects individual utility. This paper nests three variants of the ‘Joneses’ effect into an otherwise standard growth model. Under some conditions, growth and distribution are jointly determined, presenting thus a unification of the relevant theories. These variants are however not equivalent in terms of their effects on growth and distribution. It is also shown that, at least if comparisons-in-mean predominate, rises in the mean skills level and in the exogenous skills variance increase both growth and inequality with ambiguous effects on aggregate welfare.
TL;DR: The authors put a new set of shoes on that old workhorse, the competitive talent market (CTM) model in sports economics and showed that there exist unique rational expectations equilibria for both national football league and major league baseball (MLB-type leagues) under the CTM model.
Abstract: We put a new set of shoes on that old workhorse, the competitive talent market (CTM) model in sports economics. There exist unique rational expectations equilibria for both national football league (NFL-type leagues) and major league baseball (MLB-type leagues) under the CTM model. A cursory statistical test fails to reject the empirical implications for the NFL-type league. The model also suggests empirical tests of whether or not talent demand (marginal revenues from talent), including induced effects, actually slopes down. But like all models, the competitive talent model should be applied in its context. It describes highly cooperative North American sports leagues that have a wealth of common information. But it may not do the same for other leagues if they lack this common information.
TL;DR: In this paper, the authors examined the effects of the management buyout (MBO) organizational form on employee discretion and supervision and found that supervision is lower where there is a higher proportion of craft and skilled service workers but not lower for other occupational groups.
Abstract: Using a matched sample of 1959 firms and 27,263 employees from the UK Workplace Employee Relations Survey, we examine the effects of the management buyout (MBO) organizational form on employee discretion and supervision. Our findings suggest that for MBO firms, supervision is lower where there is a higher proportion of craft and skilled service workers but is not lower for other occupational groups. Using random effects ordered probit analysis, we find that employees' discretion over their work practices is higher in MBO firms; and that the probability of higher discretion is greater where there is a higher proportion of craft and skilled service employees. Our findings are consistent with: (i) MBOs reducing hierarchical tiers and the number of supervisory staff, which increase employees' span of control and their discretion; and (ii) organizational change via an MBO being ‘skill biased’ in favour of craft and skilled service employees.
TL;DR: In this paper, the authors used a large panel of closely held micro firms and found that when a small business ages one year, its cost of debt capital decreases by 1-2 basis points.
Abstract: Not much is known about the returns to aging (maturing) in the market for small business finance. Using a large panel of closely held micro firms, we document that the cost of debt capital is higher for young firms. The main finding of this paper is that this negative qualitative relation is also obtained when cross-sectional variation in unobservable creditworthiness of small businesses and within-firm (i.e., inter-temporal) variation in their observable creditworthiness are held constant. We control for the former by firm-specific fixed effects and for the latter by a commercial credit score. We also provide an estimate of the quantitative magnitude of the aging effect, on which both economic theory and earlier empirical research are silent. We find that when a small business ages one year, its cost of debt capital decreases by 1–2 basis points. The effect is neither negligible nor alarmingly large.
TL;DR: This article reviewed some of the econometrics problems faced when estimating a rational addiction model of Becker and Murphy using panel data, and illustrated three empirical applications with three different types of data sets: micro-panel data on Russian alcohol consumption, cigarette consumption and liquor consumption.
Abstract: This paper reviews some of the econometrics problems faced when estimating a rational addiction model of Becker and Murphy using panel data. This is illustrated with three empirical applications. The first application looks at cigarette consumption using macro panel data on American states over time. The second application looks at liquor consumption using macro panel data on American states over time. The third application uses micro-panel data on Russian alcohol consumption.
TL;DR: This article examined the transitions between the labour market and inactivity in Britain between 1995 and 2004 and found that a substantial degree of behavioural heterogeneity exists between inactive individuals, and the social security system appears to influence both the timing and probability of moving between labour market states.
Abstract: This paper examines the transitions between the labour market and inactivity in Britain between 1995 and 2004. A substantial degree of behavioural heterogeneity exists between inactive individuals, and the social security system appears to influence both the timing and probability of moving between labour market states. The results presented here suggest that policy makers should not be misled by the term ‘hidden unemployment’, into thinking that substantial spare capacity exists on the periphery of the labour force. In light of recent proposals to reduce the number of Incapacity Benefit claimants, it is important to note a high degree of detachment among the long-term sick and disabled, reinforced by duration dependence and poorer educational attainment.
TL;DR: The authors would like to thank the Low Pay Commission for financial support The data used in this paper is Crown Copyright; has been made available by the Office for National Statistics through the ESRC Data Archive; and has been used by permission Neither the ONS nor The Data Archive bear any responsibility for the analysis or interpretation of the data reported here as mentioned in this paper.
Abstract: The authors would like to thank the Low Pay Commission for financial support The data used in this paper is Crown Copyright; has been made available by the Office for National Statistics through the ESRC Data Archive; and has been used by permission Neither the ONS nor The Data Archive bear any responsibility for the analysis or interpretation of the data reported here Becky Warpole provided useful comments along with participants at the EALE (2004) conference in Lisbon and the Royal Economics Society (2004) conference in Swansea
TL;DR: In this article, the authors examined the effects of occupational pension coverage and pension portability loss on voluntary job changes using a sample selection model with endogenous switching and found that pension-covered workers are three times less likely to change jobs than workers not covered by an occupational pension scheme.
Abstract: Pension-covered workers in Germany are three times less likely to change jobs than workers not covered by an occupational pension scheme. This paper examines the effects of occupational pension coverage and pension portability loss on voluntary job changes using a sample selection model with endogenous switching. The model estimates, derived from western German panel data for 1985–1998, indicate that occupational pension coverage reduces worker mobility by imposing a capital loss on those leaving their job before retirement age. Moreover, pension-covered workers receive a higher compensation, which discourages mobility. Making pensions portable increases mobility, but from a low initial level.
TL;DR: The authors discusses and contrasts the different perspectives that the law, empirical labor economics and contract theory bring to the study of the employment relationship, and argues that understanding the reasons for these different perspectives should give rise to a better understanding of employment relationship and more effective labor market policy.
Abstract: This note discusses and contrasts the different perspectives that the law, empirical labor economics and contract theory bring to the study of the employment relationship. Understanding the reasons for these different perspectives should give rise to a better understanding of the employment relationship and more effective labor market policy.
TL;DR: In this paper, the authors show that in a model with a service sector, the golden-rule capital stock is lower and dynamic inefficiency is more likely to occur than in the conventional one-sector model.
Abstract: The elderly consume more labour-intensive services than young individuals. This makes them vulnerable to rising costs of services due to higher wages, which can be caused by increased capital accumulation. This paper shows that in a model with a service sector, the golden-rule capital stock is lower and dynamic inefficiency is more likely to occur than in the conventional one-sector model. This implies that in many cases, a positive Pay-As-You-Go tax maximises long-run welfare in a service economy. Calculations based on data from the United Kingdom and the Netherlands show that the long-run optimal degree of funding coincides with the current situation in these countries.
TL;DR: The authors find that a policy that minimises the sum of national utility losses leads to higher average utility if the variability of common shocks is large relative to idiosyncratic demand shocks in the non-tradables sectors.
Abstract: Which policy objective should a central bank pursue in a monetary union with asymmetric monetary transmission and different rates of inflation? Should it base its decisions on the EU-wide average of inflation and growth or should it instead focus on (appropriately weighted) national utility losses based on national rates of inflation and growth? We find that a policy which minimises the sum of national utility losses leads to higher average utility if the variability of common shocks is large relative to idiosyncratic demand shocks in the non-tradables sectors. We draw conclusions for the appropriate weight of common and national objectives in the union.
TL;DR: In this article, the authors extend the model of Harrington and Hess (1996) by incorporating valence advertising, and find that when the available resources are sufficiently small and certain reasonable assumptions are fulfilled, the candidate with the higher initial valence index will run a relatively personal campaign while the candidate having the lower initial value will run an ideological campaign.
Abstract: In this expository note, we extend the model of Harrington and Hess (1996) by incorporating valence advertising. There is a two-candidate electoral contest. Candidates inherit a certain position indicating their ideological platform in an unidimensional policy space. They also inherit a certain valence index which is a comprehensive term for personal traits that are desirable to all voters such as integrity. The candidates can subsequently influence these using negative advertising with regard to both ideological and valence factors. We find that when the available resources are sufficiently small and certain reasonable assumptions are fulfilled, the candidate with the higher initial valence index will run a relatively personal campaign while the candidate with the lower initial valence index will run an ideological campaign.
TL;DR: In the Church of Scotland, this paper found that male ministers are more likely to be matched to affluent churches permitted to pay a voluntary stipend premium all else equal, conditional on eligibility.
Abstract: This empirical study addresses whether the gender of a minister has any effect on remuneration in the Church of Scotland in 2004. The data set merges three cross-sectional sources, namely denominational data, church census information and local geographic (postcode) characteristics. We find that male ministers are more likely to be matched to affluent churches permitted to pay a voluntary stipend premium all else equal. Moreover, conditional on eligibility, there is evidence that male clergy are more likely to receive this bonus. The data are unable to discriminate between demand and supply side explanations of these findings.