Fading Shooting Stars – The Relative Age Effect, Misallocation of Talent, and Returns to Training in German Elite Youth Soccer

Key date assessments are common in the contexts of firms’ hiring decisions, the educational system, and professional sports. In talent selection, it is very likely that there is a difference between current and potential performance levels. This paper analyses the Relative Age Effect (RAE) in German elite youth soccer academies. We examine the efficiency of talent selection and the returns to training. Our results indicate a strong effect of players’ birth dates on their probability of getting selected – and, thus, a waste of talent. Using data on 2,383 former elite youth players and their later market values, we find that clubs could generate 30.6 to 72.8% higher market values when eliminating the RAE. Our findings emphasize that distinguishing between current and potential performance levels is crucial for the efficient allocation of talent in sports and society.