A Note on the Endogeneity of the Pay-Performance Relationship in Soccer

Torgler and Schmidt (2007) have recently found a positive impact of pay on player performance in German soccer, measured by the number of goals and assists scored within a season. This note shows that their result is spurious as both a player's wage and goal/assist scoring are driven by individual playing abilities. Holding the (unobserved) time invariant and the varying talent of a player constant, the positive pay-performance link is no longer statistically significant. In professional soccer, wages seem to buy talent rather than motivation