This paper investigates the relationship between players’ wages and sport performance in the Italian top professional football league - Serie A. The analysis focuses on 14 seasons from 2001/2002 to 2014/2015. Findings show that aggregate wage expenditure is a robust predictor of success for Italian professional football teams. We first exploited a fixed-effects panel data and eventually we addressed the problem of endogeneity by providing a dynamic IV specification of the model. Based on the System-GMM framework, we employed a model including lagged terms of dependent variables and covariates as instruments to control for endogeneity as well as alternative exogenous instruments to control for geographical/environmental factors and socio-economic factors that could be the actual predictors of performance through an indirect effect on payroll.
- Italian Serie A
- sport performance