Productivity Under Large Pay Increases: Evidence from Professional Baseball

29 Pages Posted: 24 Aug 2010

See all articles by Kerry L. Papps

Kerry L. Papps

Cornell University; IZA Institute of Labor Economics

Abstract

The establishment of the free agency system in the 1970s resulted in large salary increases among professional baseball players. Historical data show that players have tended to perform better at early stages of their careers since free agency was introduced. Under the current salary bargaining system, players only become eligible for salary arbitration and free agency at predetermined points in their careers, resulting in sudden changes in salary growth rates at these points. Using data on official days of major league service, it is found that players with high expected salary growth perform better, consistent with efficiency wage theory.

Keywords: efficiency wages, productivity, baseball

JEL Classification: J24, J31

Suggested Citation

Papps, Kerry L., Productivity Under Large Pay Increases: Evidence from Professional Baseball. IZA Discussion Paper No. 5133. Available at SSRN: https://ssrn.com/abstract=1663173

Kerry L. Papps (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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