The inefficiencies of a billionaire market

Abstract

This paper investigates the labor market of the English Premier League by studying the relationship of wages with performance and popularity. The results show a weak link between performance and wages and a strong link between popularity and wages. Furthermore, when analyzing lags in salary adjustments to address whether the previous results had been a consequence of information asymmetries, the outcomes show that performance is now a worse indicator than before. The findings in this paper might imply that, in the English Premier League, clubs determine salaries considering the revenue that players generate and not only how well they play.