Economic effects of promotion and relegation in parallel competitions

Abstract

Previous research evidence some negative effects after league relegations. However, these works focused only on domestic league figures, overlooking that football clubs play in simultaneous tournaments. Therefore, the effects of relegation in a domestic league on those simultaneous championships remain unclear. Our dataset comprises twenty men’s Brazilian State Championships from 2013 to 2017. Panel Data Ordinary Least Squares models are employed as econometric techniques. The results suggest that the promotions to the second tier of the Brazilian League increase both attendance and revenues of clubs while relegations impact them negatively. Nonetheless, the promotion to the top tier produces no significant increase, which may indicate a potential adverse demand effect. Further research may inspect whether it happens in European football.