__________________ Région et Développement n° 31-2010 ___________________ THE ECONOMIC CONSEQUENCES OF FOREIGNER RULES IN NATIONAL SPORTS LEAGUES Markus LANG*, Alexander RATHKE**, Marco RUNKEL*** Abstract – Profitable and balanced domestic league sports are among the central prerequisites for attracting the right to host a mega-event like the soccer world cup as well as for the overall economic success of such events. This paper pro- vides a contest model of a professional team sports league and analyzes the impact of a restriction on foreign players. It shows that a league with binding restrictions on foreign talent for all clubs is more balanced than a league without binding restrictions on foreign talent. Moreover, the wage level of domestic (foreign) talent is higher (lower) in a league with a binding restriction on foreign players. Finally, a tighter restriction on foreign players increases profits of all clubs. Keywords: TEAM SPORTS LEAGUES, COMPETITIVE BALANCE, PLAYER SALARIES JEL classification: L83 We gratefully acknowledge financial support provided by the Swiss National Science Foundation (SNSF research project no. 105270) and the research fund of the University of Zurich. * Institute of Strategy and Business Economics, University of Zurich, Plattenstrasse 14, 8032, Zurich, Switzerland. E-mail:
[email protected] ** Institute for Empirical Research in Economics, University of Zurich, Winterthurerstrasse 30, 8006 Zurich, Switzerland. E-mail:
[email protected] *** Faculty of Economics and Management, University of Magdeburg, P.O. Box 4120, 39016 Magdeburg, Germany. E-mail:
[email protected] 48 Markus Lang, Alexander Rathke and Marco Runkel 1. INTRODUCTION Running a financially healthy and balanced national sports league is among the central prerequisites for attracting the right to host an international mega-event like the FIFA1 World Cup or the UEFA2 European Football Cham- pionship.