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Transfers, homegrown players and competitive balance

02, 09, 13
by Stefan Szymanski
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As we reach the transfer deadline and the bodies are being shipped to avoid the witching hour, it is worth reflecting on the importance of the transfer market to the success of teams. The wages that clubs pay their players is the best predictor of league performance, not because higher wages make players try harder, but because in the marketplace better skills command a higher price. The net amount spent on transfers in any one year is not a very good predictor of performance largely because this measure captures the flow of talent, whereas it is the stock that determines performance. Graeme Riley has constructed a very interesting database of player transfers fees (taken from public announcements) for Premier League teams going back to 1993 and then created an index of squad values (TPI) by uprating a player’s value each year by the average rate of transfer fee inflation. It turns out that this measure is highly correlated with wages, and so highly correlated with league performance.

One of the problems with this index is that it excludes homegrown players, since by definition they have not yet had a transfer fee placed on them. That, in my opinion, is why his index performs slightly worse than wages in explaining performance (although the gap is not very large). Graeme’s data also allows you to see how many homegrown players appeared on average in the starting eleven for each club. Here’s the data for 2013

 

club

Average homegrown players per game

League position

Man City

0.2

2

Chelsea

0.7

3

Stoke

1.1

13

Wigan

1.2

18

Spurs

1.3

5

Arsenal

1.9

4

Man Utd

1.9

1

Liverpool

2.2

7

Southampton

2.3

14

Everton

2.7

6

Newcastle

2.8

16

Sunderland

3.2

17

Norwich

3.3

11

Aston Villa

4.2

15

QPR

4.7

20

Fulham

4.7

12

Swansea

4.8

9

West Brom

5.1

8

Reading

5.1

19

West Ham

6.3

10

 

The average for the league is 3, and for a few clubs have around half their starting eleven are homegrown, but clearly the bigger clubs mostly rely on players bought in.

One of the problems with Financial Fair Play is that it will limit the opportunities for the smaller clubs to buy in the market. Apologists sometimes argue that this will have the benefit of forcing clubs to develop their own talent and that as a result we will see smaller teams rise up on merit. I think this table suggests that the big clubs, despite typically having the largest academies, will continue to buy in the top talent, and the feasibility of “organic” growth for the small clubs is questionable at least.

Last week a report funded by the European Commission reviewed the UEFA homegrown rule, which requires each club to field a minimum number of players trained in their own academy and a minimum number of players trained in the club’s national association. It was claimed that the homegrown rule would improve competitive balance in European competition. The authors of the report claim that there is some slight support for this conclusion, though I have to say that my own reading of the econometrics (Appendix D) is that even this argument is highly questionable.

The fact is that there are hundreds of professional clubs competing within the European pyramid system, and perhaps only a few dozen players with the capabilities to win championships. Once in a blue moon a club might generate a clutch of world class players internally, but in practice the club which dominate the game rely largely on buying in talent from around the world. If there truly were any interest in creating a level playing field, then all that is required would be to abolish the transfer system entirely and tie each player in perpetuity to the club that trained them.

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