The Effects of Economic Status on International Soccer …

[Pages:31]The Effects of Economic Status on International Soccer Success

BY BAILEY MORTON

THESIS This thesis is submitted to the faculty of the Economics Department of the University of Florida in partial fulfillment of the requirements

for the Bachelor of Arts degree

Gainesville, Florida

Approved by: ______________________

Dr. Michelle Phillips Thesis Advisor

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I. Introduction European and South American countries have historically dominated the international

soccer landscape. This continues to be the case in the 21st century. Further, only European and South American countries hold World Cup titles, with Europe holding the most titles among all continents, 12, and having come out on top in each of the last four tournaments (World of Soccer). Per the ELO ratings for world soccer, most countries in the top 50 are predominantly South American or European. Typically, these European countries are more developed and thus wealthier. When considering the economic strength, one usually can conclude that richer and more developed countries can provide better resources and facilities for their citizens. If this is the case, then it would seem reasonable to assume that the higher the level of economic strength a country has, the better it would perform on the international stage, since richer countries have access to more facilities, coaches and technologies to enhance player performance. Yet, when considering the 2018 ELO ratings, the U.S., one of the richest countries in the world, sits only at 25th, with other developing countries, such as Senegal, only 6 places behind them. Furthermore, many of those same South American power-houses are classified as developing countries and are relatively poorer, but have consistently ranked far above the U.S.

Thus, this paper attempts to explore the effects of real GDP per capita and other economic factors such as income inequality, per capita education spending, urbanization, popularity, and corruption on a country's success on the international soccer stage.

II. Sample The sample that will be used for this study will be those of countries, out of the 238

countries that are present in the ELO ratings system, which have played at least 100 matches, in

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the years 2002-2016 resulting in 2658 observations. More specifically, we will use yearly observations from that aforementioned time frame for this study. Thus, the number of teams who have played 100 matches was larger in some years than others. This includes all countries that have participated in both friendly and competitive matches that were played under major soccer confederations. The reasons for selecting countries based on this characteristic are that "ratings tend to converge to a team's true strength...after about 30 matches" (ELO) and because having played 100 matches usually indicates that the team has existed long enough to play in a greater number of competitive matches. These matches can include, World Cup qualifiers, or regional championships like the Copa America, African Cup of Nations, or Gold Cup in North America.

III. Dependent Variable The dependent variable that will be considered is a country's international soccer success,

which will be measured by the ELO rating system, using the years 2002-2016. These years were chosen to study the game during the 21st century world cup era and at a time with a more globalized and ever-changing world. Since many of the economic data was unavailable for 2018, the range was reduced to 2002-2016. An ELO rating is calculated by "adding a weighting for the kind of match, an adjustment for the home team advantage, and an adjustment for goal difference in the match result" (ELO). Thus, this rating system is slightly more comprehensive than the traditional FIFA ranking and reduces any bias that might occur if a team has played fewer matches, participated in fewer major tournaments, performed better against weaker teams, etc. Further, it also displays the point totals for each team-which the FIFA rankings do not do-so that the spread between teams is more visible. For the full explanation of the ELO rating calculation

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and the FIFA ranking calculation, visit and .

IV. Independent Variables Real GDP Per Capita

Thus, this study will make use of a country's yearly real GDP per capita for the years 2002 -2018 from the World Bank. It seems that richer, more developed countries would perform better on the international stage since they can fund the construction of more stadiums and training facilities, hire better coaches and utilize modern statistical technologies to study player performance. On the other hand, countries with larger populations will have a larger pool of players to draw from, so using GDP per capita instead of aggregate GDP allows for a better, more relative comparison of income. However, countries like Paraguay and Senegal, which typically are ranked in the high 20's and low to mid 30's, in the ELO rating system, are usually ranked in the low to mid 100's in GDP ranking, as evidenced by the CIA World Fact Book and the World Bank. There seems to be some positive correlation between ranking and GDP, in that nearly half of the top 50 ELO-ranked countries are also amongst the top 50 GDP-ranked countries. But the spread, in terms of wealth, on average, increases significantly from ELO ratings between 50 and 100. For example, developed countries like Canada and Slovenia have ranked below developing countries like Honduras and Iraq. Thus, it appears that higher GDP does not necessarily guarantee international soccer success.

Income Inequality

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The level of income inequality in a country can vary significantly amongst developing and developed countries. It can be seen from the CIA World Fact Book, which measures Gini coefficients on a scale that ranges from 0 to 100, with 0 referring to perfect equality and 100 referring to perfect inequality, that a developed country like Hong Kong has one of the highest levels of inequality, with 53.9-which sits Hong Kong at 9th on the list. Similarly, the U.S. and Singapore, two other developed countries, are indexed at 45.9 and 45.0, showing up in the top 40 for income equality level. While most developed countries are clustered at the bottom and the least developed at the top, there are several countries from each level of development that stray from their respective trends. However, since the data for Gini coefficients for each year, from 2002-2016, is not available, we will use, as a proxy for Gini Coefficients, the share of income by the top 1% in each country to measure income inequality. This will be measured as a percentage of the share of the total income in a country. This data will be provided by the Top Income Index database. Furthermore, if we look at the top ELO-ranked countries, those that are European and South American countries, we can see that many South American countries like Brazil, Chile, and Colombia are within the 20 highest levels of income inequality, while strong European teams like France, Germany, and Croatia show up in the bottom 20. The fact that most developed, high ELO-ranked Europe countries have tighter inequality gaps allows more people at all income levels to invest time in soccer. Then, since Europe boasts the strongest club leagues and thus is home to a pool of powerful investors, it allows its countries to have the money to support stadium construction and focus on player development and grow and secure local talent. On the other hand, in South America, where income inequality is greater, it may be the case that these countries have equally superior access to talent because that opportunities for good employment are slimmer and playing soccer can become the only alternative or path to financial

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success and sustainability. Therefore, there is a potential for a greater number of high-level players available who wish to escape poverty and lack of opportunities.

Education Spending Per Capita It is worth it to consider the level of education of spending a country achieves as it

reflects a country's commitment to the growth of its citizens' abilities, skills, and contributions to the economy. Typically, developed countries are more concerned with greater investments in education because they can afford to better fund their students to keep their economies more productive, so that education further develops a country and conversely. It is also possible that countries with better public-school funding can boast stronger soccer programs. Thus, this funding could allow players to have a better opportunity to develop and be exposed to the sport at a young age. Further, they might then have an easier time be scouted at the professional level, if they can make a name for themselves within local school leagues. Thus, this study will make use of the percent of government expenditures on education spending for the years 2002- 2018. These percentages will be multiplied by the real GDP per capita amounts and divided by the population to convert this metric into per capita terms. A brief insight can be seen by studying a small but notable sample of countries. If we consider the OECD countries, then we can see that the more developed, richer countries spend more on primary to non-secondary education per capita. This includes highly ELO-rated countries like the dominant European countries including France, Belgium, Germany, Netherlands, as well as the United States, South Korea, etc. (OECD) However, on average, South American powerhouses, with high ELO ratings like Argentina, Colombia, Brazil and Chile rank towards the bottom of this group (OECD).

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Urbanization: The level of urbanization of a country, i.e. the number of people living in urbanized areas within a country, is indicative of the developmental stage of a country. For this study, the yearly percentage of people living in urban areas, as estimated by the World Bank, from the years 2002-2018, will be analyzed. The inclusion of this variable is related to the farreaching effects urbanization has on a country. Historically, urban areas have allowed for better access to health care, nutrition, goods and services, jobs, as well as facilities for entertainment (Lore Central). Thus, it is of interest for this study to see if rising levels of urbanization, which traditionally lead to higher access to health/nutrition, employment, as well as facilities for sports teams allow for countries to better develop players for international success.

Popularity: An important aspect of success can be seen regarding the amount of media coverage soccer receives in a country as well as its relative popularity, in that "popularity of a sport depends on its broader significance within a nation's culture" (Hoffman et. al). It is reasonable to assume that said significance to a nation's culture can be created due to accessibility and awareness of the sport. Further, it appears this popularity can be a result of intense media coverage of a sport relative to other sports, news, and ideas. An example can be seen in the U.S. where the popularity of soccer pales in comparison to that of sports such as football and basketball, due to intense media coverage by networks such as ESPN on those sports, in addition to the historical popularity of those sports in American culture. Thus, it is possible that an oversaturation of media content relating to soccer can influence more people to pursue professional careers in the sport, due to its significance in their country. To measure this concept of popularity, the Google Trends Index for searches of "FIFA", a language-neutral word, from 2004-2016, will be used to indicate the number of people who will have been potentially exposed

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to soccer-related media such as matches or internet highlights, since FIFA owns most of these videos, photos, etc. This analysis will be included in the appendix.

Corruption The level of corruption in a country is indicative of that country's ability to maintain the rule of law, as well as properly fund and maintain infrastructure, the educational system, and the economy as a whole-increasing the difficulty of performing transactions, uncertainty regarding employment, inefficient allocation of resources, etc.(Investopedia) In the case of international soccer, the main governing body of soccer, FIFA has faced multiple of allegations of bribery and corruption. In 2015, multiple high-ranking FIFA executives were arrested and banned from soccer, for charges relating to "money laundering, racketeering, wire fraud" (BBC). Additionally, there is speculation that these same officials have been involved in bribery scandals regarding the selection of host countries for the World Cup. Thus, it is reasonable to examine if corruption may have played a part in allowing certain countries to play easier matches and have better chances at advancing in major tournaments. Further, it is possible that corruption may have weakened a country's ability to properly regulate its national team and compete at the international level. Another facet of corruption is that an inefficient use of funds may have prohibited certain national teams from both forming or growing earlier, because there was a lack of access to stadiums, better training, and nutrition. This study will make use of the corruption index for the years 2002-2018 created by Transparency international, where from 2002 to 2009, a score of 10 translates to "very clean" and 0 translates to "very corrupt", and from 2009 onward, 100 translates to "very clean" and 0 to "very corrupt". Thus, to standardize the values, the index

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