Team Performance, Efficiency and Wage Distribution in Professional Baseball
34 Pages Posted: 10 Mar 2008
Date Written: August 1, 2007
Abstract
The effect of wage inequality on team production is an important question in labor economics. Data from sports are well suited to study this problem, with more than 10 published papers in the last decade. We analyze the effect of wage inequality both on team performance and efficiency, using data from Major League Baseball(MLB) and a stochastic frontier model with a translog production function. Most studies have examined the impact of inequality within a linear framework, and found that more equal pay structures enhance team production. This presupposes that there is no limit to benefficial effects of equality in pay, an idea which seems suspect. In this paper we allow for a possible non-linear relationship between wage inequality and team performance, and find that most MLB teams have wage structures which are sub-optimal. Furthermore using a semi-parametric estimation we find that high efficiency teams have a lower degree of wage inequality than low efficiency teams. This suggests that teams first compete by trying to adjust the structure of the wages to the optimum and then increasing the amount of total wages.
Keywords: tournament theory, wage inequality, productivity analysis
JEL Classification: J31, L20, L83
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Piece Rate vs. Time Rate: The Effect of Incentives on Earnings
By Eric Seiler
-
Potential, Prizes and Performance: Testing Tournament Theory with Professional Tennis Data
By Uwe Sunde
-
An Economic Evaluation of the Moneyball Hypothesis
By Jahn Karl Hakes and Raymond D. Sauer
-
Contests, Grand Prizes, and the Hot Hand
By Todd Mcfall, Charles R. Knoeber, ...
-
Incentives versus Sorting in Tournaments: Evidence from a Field Experiment
By Edwin Leuven, Hessel Oosterbeek, ...
-
Incentives Versus Sorting in Tournaments: Evidence from a Field Experiment
By Edwin Leuven, Hessel Oosterbeek, ...