The Beckham Rule: Major League Soccer Wage Inequality and Team Performance
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In the quest for international soccer relevancy, MLS faces strong competition. Established European soccer leagues and strong domestic competition from the NFL, NBA, MLB, and NHL create steep barriers for league growth. To boost its international profile, MLS created the Designated Player (DP) Rule in 2007. This rule resulted in increased average salary and wage dispersion among the existing teams. This study examines the effects of these large wage changes on team performance. In the constructed model, the results of this increased wage dispersion remain inconclusive. Nonetheless, although the results from the average salary and team performance examination stand just outside the significance test cutoff, this model presents similar findings to previous literature in finding a substantial positive relationship between the two.