Soccer holds key to wealth and influence

Cities which are home to a leading soccer club are winners not just on the field but in the game of political and economic influence, a Deakin University economist believes.

In fact using a global analysis of soccer championships* Associate Professor Mehmet Ulubasoglu has been able to use the game as a proxy to show the concentration of political and economic power across the world and within a country itself.

"Successful soccer teams are the ones who can hire the best talent, a feat that requires command over relatively large resources that need to be raised from fans, supporters, merchandise sales and broadcast revenues," Associate Professor Ulubasoglu told the Australasian Meeting of the Econometric Society at the Australian National University (7-10 July).

"Typically most of these sources are local, but we would argue that teams that credibly contest championships are the ones located in cities which command relatively more resources.

"You could tease out a reasonable measure of geographical distribution of wealth in any given country by looking at soccer championships and the relative importance of the cities these teams represent."

Associate Professor Mehmet Ulubasoglu said being able to see the concentration of political and economic power was important because of the effect it had on the economic development of a country.

"Basically the concentration of political and economic wealth in one city can act as a brake on economic development of a country over the long-run, because it stops competition and effectively concentrates all the money and resources in one place, choking innovation and development due to the political influence it affords," Associate Professor Ulubasoglu explained.

"This effect has been noticed since 2AD after Rome became the largest city in the world. Its size meant that Rome used its military and political power to suppress competition and extract resources from its empire. Researchers believe the parasitic character of the Rome metropolis was not only responsible for weakening the Italian economy, it also played a central part in the collapse of the empire."

Associate Professor Ulubasoglu said similar patterns had been seen as the world developed with such cities being labelled Romes without Empires.

"Economists have long struggled with definitively measuring the implications of high urban concentration and its effect on the economic outcomes of a country partly because of the difficulty of measurement; cities' populations do not always convert to a political influence measure," Associate Professor Ulubasoglu explained.

"So we developed an alternative measurement by creating an index of the distribution of soccer championships across cities in a given economy mimicking the geographic concentration of wealth and political influence."

Associate Professor Ulubasoglu said soccer had been chosen because it was one of the most popular sports in the world, played at professional and amateur level.

"A FIFA study found that more than 240 million people regularly played soccer in more than 200 countries," he said.

"What made soccer particularly attractive for us is the fact that in professional premier leagues, teams competing for the championships have been associated with urban centres, any city worth its salt being represented by at least one soccer team in the league.

"The study covers 100 countries, including Australia. Because not all countries' favourite sports is soccer, the implications are cross-checked with a sub-sample of 45 countries which participated the FIFA World Cups - soccer is more likely to be a premier sport in those countries - similar results hold.

"Consider Germany and Paraguay, which, respectively, possess one of the lowest and the highest geographical concentration of wealth. Our analysis suggests an average of 2 per cent difference in the annual growth rates of these countries over the period 1960-1999 due to differences in the geographical concentration of wealth and its associated effects.

"Federal countries like Australia are advantaged because employers, employees and industry can move around which is likely to reduce political agglomeration.

"Australia can still do better if Melbourne and Sydney's dominance is reduced, however."

*The study is co-authored with Professor Cem Karayalcin of Florida International University, USA.