Friday, November 30, 2012

The Myth of the English Premium

Every time an Andy Carroll or Alan Shearer get sold, Liverpool (over-)pay for British-born players, or Arsene Wenger (and lately, Alan Pardew) go shopping for undervalued talent in France, the idea of an English (or sometimes, British) premium is bandied about.

But is it really true that you have to pay a premium for English players? The underlying idea here is that there is positive discrimination in the English player market, with selling clubs charging a little (or a lot) extra for English or British players.

To find out, first, let's look at how the transfer market currently values English v. non-English players (or players fortunate to hail from the British Isles or not).

Using data from the respected Transfermarkt website on all players currently on Premier League squads, we performed a variety of calculations on their transfer values (complete data were available for a total of 502 players; we collected these data in October).

One thorny problem, of course, is who counts as "English" or "British" - this turns out to be slightly less than obvious. Sure, Ben Foster is English, but there are a number of players whose ancestry or personal history is more than a bit muddled. Some of it owes to the vagaries of modern migration; some of it has to do with which national side someone chooses (or hopes) to play for. So, this is a long way of saying: we did our best to determine a player's nationality, but we probably made a few calls that are debatable. That's our first indication, though, that determining the English premium is less than completely straightforward.

Keeping those caveats in mind, the numbers show that the market appears to value English and British (which includes Scottish, Irish, and Welsh) players less than the average.

Recall from our previous analysis that the average Premier League player this fall is valued at £5.94 million. In contrast, English players are valued almost exactly one million pounds less (£4.96) and all British players combined about £1.5 mio. pounds less. (£4.51). In fact, given that about half of all players in the league qualify as British in some way, the average of £5.94 million is brought down by the relatively low valuations of native footballers. The average for non-Brits, in fact, stands at £7.39 million.

On its face, this suggests that English/British players can be had at a bargain, rather than a premium.

But seeing differences in averages doesn't mean that English or British players necessarily command a premium - by definition, "premium" implies that a club needs to pay more to obtain an English player than they would for an ordinary player; it's a kind of surcharge for the same player they would otherwise buy.

To figure out if there is evidence of a premium, we conducted several regression analyses to see if a player's "Britishness" is a significant predictor of his market value once we take into account a variety of factors that also might determine how much he goes for - things like age, his contract year, which club he plays for, position, etc. The regressions are important because they allow us to control for things like quality (the average player on a top team is better than the average player on a team closer to the bottom) or career trajectory (players' values tend to increase with age but also have a distinct peak) or position (goalkeepers go for less than forwards), and so on. That is, we wanted to know: if we were to find two players of the same age playing for the same club in the same position, etc. - with the same characteristics - would the English or British player be more or less expensive, or would it not matter at all? We suspected these analyses would wash away a lot of the effect of "Britishness."

The results are clear. Our analyses show that British and English players are systematically less expensive than players from other countries even when we account for a number of player characteristics. Using the numbers from our regression models, the following are the transfer values we would predict (in millions):

Non-British: £7.45
British: £5.07

Non-English: £6.97
English: £4.99

We suspected that part of this pattern had to do with the fact that our pool of players includes a bunch of young lads riding the bench, while the foreign-born superstars make up much of the starting XI.  Not so. Even when we select only players above, say, age 22, or who have experience playing in the league, the same pattern appears.

To see how this plays out, we can use our models and some fancy math to determine how the market values two identical players. Let's take two 25-year old midfield players who are - for the sake of argument - identical and average in every other way. Our prediction for the British player would be that he is valued at £3.96 million; for the non-Brit, the model predicts £6.58 million. Or let's take the average 28-year old forward; the Brit would be valued at £4.74 million; the equivalent player from elsewhere £7.36.

None of this means, of course, that there aren't exceptions; but for every Andy Carroll or Fernando Torres there are many more "normal" players who produce the average. And that's the point: to show what's normal in the transfer market. According to these numbers, normal is that the effect of being British persists and that it is negative rather than positive or zero.

So when we put it all together, the numbers tell a clear story: British players go for less. Why, then, does the notion of a British premium still have legs? We suspect it's because nationality is one of the factors that are easy enough to understand and compare players on. In a league that has seen a huge influx of foreign players in the last 20 years and whose talent currently is roughly half domestic and half international, the question of who is better or who is more valuable is a fun question to bat around.

We also suspect the idea of a premium rears its head with regularity because people remember the unusual - Liverpool's buying spree under Comolli or Wenger's success in scouring the French market - rather than the typical. Outliers are memorable and vivid - averages less so. And the average British player goes for about a million and a half quid less than the identical import. A bargain, some might say.