Salary differences under the salary cap in Major League Soccer

Abstract

Professional soccer is the world’s most popular sport; a number of National Leagues are under the control of National Associations. The economic theory behind soccer is the continuing competition to earn much more than other sports do in the sports market. Since the supply of talent is limited, teams’ demand for certain professionals is so strong that it leads to salary differences between players. Therefore, in this study, attention is given to the determinants of the differences in workers’ salaries in the Major League Soccer labor market using Generalized Least Squares (GLS) estimation on panel data from 2007 to 2016. Birth place is the most influential determinant of a player’s salary, along with a player’s position, a player’s age, whether the player has a national team duty, and the number of games in which the player started in the first eleven. Conversely, moving from one Major League Soccer team to another and the number of games played as a substitute have a negative effect on players’ salaries.