The consequences of promotion and relegation in European soccer leagues: A regression discontinuity approach

Abstract

European soccer leagues operate on a ”promotion and relegation” system, in which poor-performing teams are moved to a lower division of play, and high-performing teams are moved up. Because of the prestige and television exposure of higher divisions, promotions and relegations have major financial and competitive consequences for clubs. I use a regression discontinuity design to study the consequences of promotion and relegation in Europe’s top soccer leagues, comparing just-relegated teams to just-surviving teams, and the same for promotion. On the field, both relegation and promotion have lasting impacts, with significant effects lasting 3 or more years, and the point estimates suggest even longer effects. The effects of promotion are slightly larger and more persistent. Financially, promotion is worth between $238–280 million over the next 7 years, while relegation costs between $225–262 million.