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11.06.2020

New discussion paper on financial regulation in the German Bundesliga

FG Wirtschaftstheorie

Oliver Budzinski and Philipp Kunz-Kaltenhäuser (both authors: Ilmenau University of Technology) published a new discussion paper on Promoting or Restricting Competition? – The 50plus1-Rule in German Football.

The 50plus1-rule in German football is a controversially discussed institution that regulates investment behavior of professional football teams. This paper discusses from a sports economics perspective the suspected market failures that the 50plus1-rule is expected to prevent.

To examine the effects of the regulation empirically, the authors gathered panel data on 47 teams in the German Major League Football (“Erste Bundesliga”) from the seasons 1989/90 until 2018/2019. Applying various econometric approaches to measure financial and competitive imbalance in the league, the authors derive a growing trend of imbalance since the introduction of the 50plus1-rule. The analysis employs a comparison between afflicted competitors and those exempted from the rule to examine investment behavior in budgets and sporting success. The results do not suggest any equalizing properties of the regulation and point at the anti-competitive effects as well as distorting properties of the regulation.