Income and International Soccer Performance

Abstract

This study empirically examines how income affects a country's performance in international soccer games. Previous studies suggest a positive link between income and soccer performance as well as an inverse U-shaped relationship. The paper contributes to the literature by using various estimation techniques such as a dynamic GMM panel data approach and explaining the mixed results of the existing empirical studies. The empirical results show that the cross-sectional analysis confirms the positive effect of income on soccer performance, while the panel data analysis supports the inverse U-shaped relationship. This evidence implies that high income countries perform well in international soccer, while low income countries perform poorly. On the other hand, as a country's income rises, soccer performance improves at a decreasing rate, and then gets worse beyond some level of income. The inverse U-shaped relationship is also supported by the split sample regression result that the positive effect is found in low income countries only.