Handling heteroskedasticity in labour demand functions of athletes

Rappai Gábor () and Fűrész Diána Ivett ()
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Rappai Gábor: Department of Economics and Econometrics, Faculty of Business and Economics, University of Pécs, Pécs, Hungary
Fűrész Diána Ivett: PhD Student, University of Pécs, Pécs, Hungary

Croatian Review of Economic, Business and Social Statistics, 2018, vol. 4, issue 2, 47-56

Abstract: Based on previous research it can be stated that modelling sport economics related demand curves (e.g. demand for sport events and athletes) is different from other types of modelling. The difference lies in the fact that some parts of the demand curves are nearly horizontal in case of sport goods and nearly vertical in case of athletes, because the price of sport events is inflexible and at the same time, salaries of top athletes are extremely flexible. This study investigates parameter estimation methods appropriate for the relevant demand functions of sport economics. In this cases the generally used ordinary least squares estimator is less robust, so the weighted least squares estimators are able to handle heteroskedasticity. If the distribution of the variables is known, the Newey-West heteroscedasticity corrected estimates give even stronger results. The empirical study analyses footballer transfer fees in top European leagues and identifies a threshold at which the traditional supply-demand functions are not appropriate. According to the results, word class athletes, in a way, can be considered prestige goods for which demand may be irrational.

Keywords: demand curves; football market transfers; robust estimation methods; sports economy (search for similar items in EconPapers)
JEL-codes: C21 C23 C52 Z22 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:crebss:v:4:y:2018:i:2:p:47-56:n:6

DOI: 10.2478/crebss-2018-0012

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