Team Performance, Efficiency and Wage Distribution in Professional Baseball

34 Pages Posted: 10 Mar 2008

See all articles by Octavian Vasilescu

Octavian Vasilescu

University of Minessota - Morris; University of Minessota - Morris; Division of Social Sciences

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

Vasilescu, Octavian, Team Performance, Efficiency and Wage Distribution in Professional Baseball (August 1, 2007). Available at SSRN: https://ssrn.com/abstract=1103952 or http://dx.doi.org/10.2139/ssrn.1103952

Octavian Vasilescu (Contact Author)

University of Minessota - Morris ( email )

Morris, MN 56267
United States

University of Minessota - Morris ( email )

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Morris, MN MN 56267
United States
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Division of Social Sciences ( email )

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Morris, MN 56267
United States