Portuguese football league efficiency and players' wages

In this article, we use Data Envelopment Analysis (DEA) to measure the efficiency of Portuguese football clubs in the First League for seasons 2002/03 to 2008/09. Clubs spend different amounts of money on their players and use different incentive devices to achieve their aims for each season. Our first aim is to find out whether clubs are spending more money than they need to. Evidence shows that this is the case for several clubs, suggesting that buying players solely with a view to selling them on for future financial gain can seriously damage clubs' accounts and efficiency. This is all the more remarkable as the competitive level is increasing and Union of European Football Associations (UEFA) is issuing more stringent financial stability conditions. Our second aim is to ascertain the relationship between the players' wage distribution and the clubs' efficiency. We demonstrate that a higher wage spread tends to be associated with an increase in efficiency. The implication is that clubs should structure wages so as to have the optimal pay ranking for inducing players' effort.