Labour Market Intervention, Revenue Sharing and Competitive Balance in the Victorian Football League/Australian Football League (VFL/AFL), 1897-1998

This paper summarises some key aspects of a recently completed PhD thesis in the Department by Booth (2000), entitled 'Labour Market Intervention, Revenue Sharing and Competitive Balance in the Victorian Football League/Australian Football League (VFL/AFL), 1897- 1998'. The thesis is a theoretical and empirical analysis of whether labour market devices and revenue sharing rules have been effective in equalising the distribution of playing talent between clubs, thereby enhancing competitive balance. The history of labour market intervention and revenue sharing in the VFL/AFL from the league's formation in 1897 is discussed, with six different periods between 1897 and 1998 being identified for analysis. Fort and Quirk's (1995) model of US professional team sports leagues is chosen to analyse the effectiveness of the various devices that have been used in the VFLIAFL to improve competitive balance. But the model is first adapted to allow for VFL/AFL clubs being win maximisers (subject to a budget constraint) rather than profit maximisers. The various devices used by the VFL/AFL are assessed in terms of their likely impact on competitive balance, with some significantly different theoretical predictions than under profit maximisation. It was found that free agency results in a less equal distribution of player talent under win maximisation, whilst both gate sharing and increases in shared league-revenue tend to equalise playing strengths (which is not the case under profit maximisation). The conclusion reached is that a national player draft, a team salary cap and gate and league-revenue sharing is that combination most likely to succeed in achieving higher levels of competitive balance. The evidence of competitive balance over the history of the VFL/AFL is consistent with the predictions of the model.