Selection bias and peer effects in team sports - The effect of age grouping on earnings of German soccer players

This article analyzes how age grouping in youth competitions and soccer education programs affects wage formation at the professional level. A simple theoretical model shows that professional players born late after the cutoff date are expected to earn systematically higher wages than their early-born peers. Two discriminating factors are responsible for this: a systematic bias in the talent detection system and peer effects in the production process of human (sports) capital. The authors demonstrate the existence of such an effect among (native) German professional soccer players. Estimating an earnings function for players in the 1997-1998 and 1998-1999 seasons, the authors find clear evidence of a month-of birth-related wage bias. Players born late after the cutoff date earn systematically higher wages, though this effect is not discernible in all positions; it is strongest for goalkeepers and defenders but not evident for forwards.