Can a country’s soccer results be used as a preliminary indicator of a country’s

economic performance?

Introduction

The most accurate measurement of a country’s economic performance is

gross domestic product (GPD) because it measures a country’s total production in a

given time period. GDP can be defined as “the market value of all final goods and

services produced in a country during a period of time, typically one year” (Hubbard

& O'Brien, p. 239). Nonetheless, economists experience difficulties in determining a

country’s current economic situation since final numbers depend on months of data

gathering. The purpose of this research paper is to determine whether soccer can be

used as an indicator of a country’s economic performance.

The sports industry has experienced a steady growth over the past years, and

is expected to reach a number of almost twice of its 2005 total revenue by 2017.1

The effects that the sports industry has on the economy are evident since they

contribute significantly to the media and entertainment, merchandising and retail

industries (Burrow, 2013). Moreover, studies have shown that sports have an

influence over consumers’ purchasing behaviors, moods and health.

Soccer is considered to be the most popular sport in the world, accounting

for more the 40% of the sports industry global market share (Collignon, 2011). This

dominance is depicted in the fact that one billion people watched the FIFA 2014

World Cup Final between Germany and Argentina (Dassanayake, 2014). This sport

is not only big in its viewing audience, but also in the number of people that practice

1 Refer to Appendix 1

it around the world: according to FIFA’s latest report, there are 265 million playing

soccer worldwide (Kunz, 2007).

FIFA/Coca-Cola World Ranking

There are several measures to determine a country’s soccer performance.

One of the most commonly measures used is the FIFA/Coca-Cola World Ranking.

Even though there are several flaws that prevent the ranking from being an accurate

representation of a team’s performance and that some people claim it is

oversimplified, this point-based system is the best approach so far to determine a

country’s relative position to others.

The points are determined by accumulating the points a team makes when

playing international games, over a period of four years. The total of points a team

obtains in a game is calculated using the following formula (Manfred, 2014):

Points=Points formatchresult∗Importance of match∗Strength of opponent∗Strength of confederation

For more details about the formula, refer to Appendix 2.

It is important to notice that the FIFA/Coca-Cola World system does not take

into account goal difference or the home advantage, or the fact that a team might not

be playing with their best players in order to try younger ones. Moreover, the

frequency with which international games are played does not provide enough data

to make an accurate analysis.

First of all, we will compare the national teams’ position in the rankings

before the 2014 World Cup with their performance in the competition, to be able to

determine whether there is certain coherence between this ranking system and

actual results. It is important to note that at this stage we are limiting the results to

the 2014 World Cup, since it is the last significant worldwide tournament that

provides evidence of teams’ relative standings.

Country FIFA/Coca-Cola World

Ranking before World Cup2

World Cup Stage

Algeria 22 Round of 16

Argentina 5 Second place

Australia 61 Group stage

Belgium 11 Quarter-finals

Bosnia and Herzegovina 21 Group stage

Brazil 3 Semi-finals

Cameroon 56 Group stage

Chile 14 Round of 16

Colombia 8 Quarter-finals

Costa Rica 27 Quarter-finals

Croatia 18 Group stage

Ecuador 26 Group stage

England 10 Group stage

France 17 Quarter-finals

2 http://www.telegraph.co.uk/sport/football/world-cup/10835958/World-Cup-2014-countries-Fifa-world-rankings.html

Germany 2 First place

Ghana 37 Group stage

Greece 12 Round of 16

Honduras 31 Group stage

Iran 43 Group stage

Italy 9 Group stage

Ivory Coast 23 Group stage

Japan 46 Group stage

Mexico 20 Round of 16

Netherlands 15 Third place

Nigeria 44 Round of 16

Portugal 4 Group stage

Russia 19 Group stage

South Korea 57 Group stage

Spain 1 Group stage

Switzerland 6 Round of 16

Uruguay 7 Round of 16

United States 13 Round of 16

It is clear that there is a relation between the FIFA/Coca-Cola Ranking and a

team’s results. For the purpose of the research, we have highlighted the top five

teams in the ranking in green, and the lowest ranked in red. Three out of the four

best teams in the World Cup were ranked in the first five standings, and all of the

five weakest teams according to the ranking did not advance from the group stage.

Even though there are some exceptions such as Spain and Portugal who did not

perform well, we can fairly conclude that there is a relation between a country’s

position in the rankings and results.

Is there a relation with economic performance?

In order to compare the economic performance of a country to their position

in the ranking, we will use economic data of the end of the 2014 period, given that

this is the newest data that can be obtained for both variables.

Country FIFA/Coca-Cola World

Ranking end of 2014

2014 GDP (millions of US$)

United States 27 17,416,253

Japan 54 4,769,803

Germany 1 3,820,464

England 13 3,002.947

France 7 2,935.356

Brazil 6 2,244,131

Italy 11 2,129,276

Russia 31 2,057,301

Australia 100 1,482,539

Mexico 20 1,295,860

South Korea 69 1,449,494

Spain 9 1,400,483

Netherlands 5 880,394

Switzerland 12 679,028

Nigeria 43 594,257

Argentina 2 536,155

Belgium 4 527,810

Colombia 3 378,415

Iran 51 367,098

Chile 14 276,971

Greece 24 241,796

Portugal 7 220,062

Algeria 18 212,453

Ecuador 26 93,746

Croatia 19 57,371

Uruguay 10 55,708

Costa Rica 16 49,621

Ghana 37 47,830

Ivory Coast 28 32,061

Cameroon 42 29,267

Honduras 71 18,813

Bosnia and Herzegovina 29 17,828

The data shown above does not provide any clear relationship between a

country’s position in the ranking and its economic performance. Even if we consider

their results in the 2014 World Cup from the first table, we cannot identify a clear

pattern that can allow us to conclude a connection between the two variables.

The lack of evidence cannot lead us to conclude that there is indeed no

connection between a country’s soccer results and economic performance. The data

above is only evidence that we cannot use the rankings to compare countries’

economies, but it does not provide evidence that we cannot use the data to compare

one country’s economy with their previous rankings. In other words, the FIFA/Coca-

Cola World Ranking can be an indicator of a country’s current economic situation

when we compare it with the same country’s performance in the past. In order to

continue with our analysis, we will narrow the research to specific countries that

have experienced great economic changes such as recessions and treat them as

separate case studies.

Case Study: PIIGS

The economic recession that started in 2008 affected tremendously some of

the members of the European Union. The term PIIGS is an acronym that refers to the

five European nations that were considered the weakest during this crisis: Portugal,

Italy, Ireland, Greece and Spain. These countries experienced enormous debts so in

2010, European leaders approved a 750 billion euro stabilization package to

support them (Investopedia). Data showing these countries’ economic performance

is shown below:

Country GDP growth (annual %)3

2007 2008 2009 2010 2011 2012 2013

Portugal 2.5 0.2 -3 1.9 -1.8 -3.3 -1.4

Italy 1.5 -1.0 -5.5 1.7 0.6 -2.3 -1.9

Ireland 4.9 -2.6 -6.4 -0.3 2.8 -0.3 0.2

Greece 3.5 -0.4 -4.4 -5.4 -8.9 -6.6 -3.3

Spain 3.8 1.1 -3.6 0.0 -0.6 -2.1 -1.2

All of these countries had been experienced a significant increase in GDP

levels until 2007, but the Great Recession in late 2008 severed the effects of their

debts. All of these countries did not perform well in the most recent World Cup

(Portugal, Italy and Spain were eliminated in the group stage, Greece in the second

round and Ireland did not even qualify). On the other hand, the most solid European

economies such as Germany and Netherlands ended up in the first and third place

respectively. In this sense, we do find a correlation between annual GDP growth and

results in the World Cup; however, it does not provide evidence of a larger picture

as the World Cup only occurs once every four years. Therefore, we should use this

numbers to evaluate the countries separately.

In the case of Spain, the most recent titles they have won on an international

level are the FIFA World Cup (2010) and the UEFA European Championship (2008

and 2012). In the 2006 World Cup the Spanish national team was eliminated in the

Round of 16. Under the coaching of Vicente Del Bosque, the Spanish national team

3 http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

was able to conquer the soccer world and is considered one of the best teams in

soccer history. However, this recent success (2008-2012) does not coincide with

their economic downfall in the same time period. “Despite the recession, the

collapse of property values, and unemployment of over 20 percent, Spain has

remained networked with the rest of Europe” (Kuper & Szymanski, 2014, p. 389). In

this case, there is an inverse relation.

Even though the findings show that we cannot generalize certain correlations

between a country’s immediate results and their economic growth, we could

approach the analysis from a different perspective. For instance, China’s current

economic growth is not portrayed in their soccer performance, and maybe for this

reason, the country has recently announced a soccer reform plan that establishes

mandatory soccer classes in elementary and middle school curricula4. The effects of

this reform will not be observed in the near future; the children subject to this

change still need to wait to participate at an international level.

Case Study: Chile vs. Peru - World Cup Qualifier (Santiago, 2011)

In October 2011, Chile beat Peru four to two for the World Cup Qualifiers.

Peru had done a good job on their previous game against Paraguay, defeating them

two to zero in Lima, so after the defeat a question arose: Why was there such a

difference between Chile and Peru? Besides all the aspects related to the athletic

performance, the most concrete conclusion would be to say that Peru was not

playing against a team, but against a country.

4 http://en.yibada.com/articles/20355/20150318/china-s-soccer-reform-plan-aims-hone-young-athletes-schools.htm

Peru’s base team for the qualifiers was built upon players born in the year

1984. In fact, seven players of the starting eleven were born in the years of 1983-84.

This means that the team with which Peru played against Chile was raised in one of

Peru’s most complicated years: the decades of the eighties and nineties were

episodes where the country had to deal with issues of terrorism and hyperinflation.

The effects of the country’s poor economic situation were reflected many

years after the events that lead to them occurred. Therefore, a country’s economic

performance is not entirely reflected immediately; it also contributes in the long

run. For instance, the Peruvian players born in the 80’s experienced poor health and

nutritional programs, since the country’s focus geared towards other issues. This

was reflected on the constant injuries suffered by the players and their decreasing

performance level throughout the game.

Conclusion

The case study studied above provides evidence to support the argument

that we cannot predict a country’s current economic performance by using their

soccer results, since long term causes can have influence on them too. Even though

the GDP has a certain degree of influence over soccer performance as we saw in the

PIIGS case study, there are many other factors that contribute towards a good

soccer performance – both long term and circumstantial factors. As we have seen in

the different examples, in some cases there is a correlation between the two

variables studies in this research paper; however, we cannot assume causation

because the assumptions made in each of the cases are made ceteris paribus (with

everything else held constant).

In the same way, other studies have found that “a country’s FIFA ranking is a good

indicator of its long-term development, as it is significantly correlated with the

permanent (i.e. non-time variant) position of each country” (Gasquez & Royuela,

2012). However, as with economic growth, there are other factors in economic

development that can catalyze effects in a country’s national team performance,

such as the riots in Brazil previous to the World Cup.

The research paper shows that a country’s soccer results cannot be used as a

preliminary indicator to reflect the immediate economic performance of the

country; the effects are seen in the long-term. However, it does not refute the

correlation between the two: a greater GDP “means better health and education

outcomes, better sporting infrastructure and more resources spent for sports”

(Debroy, 2011).

Works CitedBurrow, G. (2013, July 9). Emsi. Retrieved April 13, 2015, from http://www.economicmodeling.com/2013/07/09/not-just-a-game-the-impact-of-sports-on-u-s-economy/Collignon, H. (2011). ATKEARNEY. Retrieved April 13, 2015, from http://www.atkearney.com/documents/10192/6f46b880-f8d1-4909-9960-cc605bb1ff34Dassanayake, D. (2014, July 13). Express. Retrieved April 13, 2015, from http://www.express.co.uk/news/world/488521/World-Cup-2014-Fans-gear-up-for-Germany-v-Argentina-finalDebroy, B. (2011, April 3). Does GDP growth influence sporting performance? Retrieved April 13, 2015, from http://articles.economictimes.indiatimes.com/2011-04-03/news/30149956_1_higher-gdp-population-medalsGasquez, R., & Royuela, V. (2012). Is football an indicator of development at the international level? Hubbard, G., & O'Brien, A. Principles of Macroeconomics. Pearson.Investopedia. (n.d.). Investopedia. Retrieved April 13, 2015, from http://www.investopedia.com/terms/p/piigs.aspKunz, M. (2007, July). FIFA Magazine. Retrieved April 13, 2015, from http://www.fifa.com/mm/document/fifafacts/bcoffsurv/emaga_9384_10704.pdfKuper, S., & Szymanski, S. (2014). Soccernomics. Nation Books.Manfred, T. (2014, June 6). Business Insider. Retrieved April 13, 2015, from http://www.businessinsider.com/fifa-ranking-formula-2014-6

Appendix 1

Appendix 2