Productive Efficiency and Salary Distribution: The Case of U.S. Major League Baseball
R. Todd Jewell
Texas State University, San Marcos - Department of Finance and Economics
University of North Texas - Department of Economics
Scottish Journal of Political Economy, Vol. 51, pp. 127-142, February 2004
Recent theoretical research suggests that a firm's salary structure can affect the firm's productivity. We investigate the relationship between payroll inequality and production using US Major League Baseball data. Employing panel data methods, this study finds that salary inequality has a significantly negative effect on team success. A general result is that team success in term of wins does not seem to be correlated with efficiency; specifically, some of the least successful teams are also some of the most efficient. In addition, salary inequality does not appear to be correlated with efficiency. Furthermore, revenues generated by teams are not necessarily correlated with team efficiency.
Number of Pages in PDF File: 16
Date posted: April 13, 2004