Labour Market Intervention, Revenue Sharing and Competitive Balance in the Australian Football League, 1897-2002

2017-06-08T01:54:53Z (GMT) by Booth, Ross
A long-running debate in sports economics has centred on whether labour market devices and revenue sharing rules are effective in increasing competitive balance in sports leagues comprised of either profit maximising clubs or win maximising clubs. This chapter examines the levels of competitive balance in a league comprised of win maximising clubs under a variety of labour market devices and revenue sharing rules and makes for interesting comparisons with competitive balance levels achieved in other professional sports leagues. Formed in 1897, the Australian Football League (AFL) has been comprised of clubs owned by their respective paid-up financial members. As a result of this ownership structure, rather than pursuing profits, analysis of the clubs' finances strongly suggests that they are win-maximisers, subject to breaking even. This chapter traces the history of labour market devices and revenue sharing rules the AFL has used to try to increase competitive balance among its win-maximising clubs. Seven different periods between 1897 and 2002 are identified and the different levels of competitive balance achieved matched against the devices used in each period. The highest levels of competitive balance achieved in the AFL have occurred in the most recent period that includes both a player draft and a salary cap. The levels of competitive balance achieved in the AFL are compared with the outcomes in some other major leagues in North America.