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The introduction of the reserve clause in Major League Baseball: evidence of its impact on select player salaries during the 1880s

Author

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  • Jennifer K. Ashcraft

    (Burlington Northern-Santa Fe Railway Company, Fort Worth, USA)

  • Craig A. Depken

    (Department of Economics, The Belk College of Business, UNC Charlotte, Charlotte, USA)

Abstract

This paper investigates the impact of baseball’s reserve clause as it evolved from a “gentleman’s agreement” to a formal contract stipulation. Using data describing the salaries of 34 Major League Baseball players during the 1880s, we test whether average salaries, remuneration to marginal product, and the premium paid to a player for changing teams were materially impacted when the reserve clause became binding in 1887. The empirical results suggest that, controlling for player attributes and the overall macroeconomy, average real salaries in the sample fell by 6–9% after the binding reserve clause. We also find that the premium for moving to a new team was reduced by 70% after the binding reserve clause was implemented, supporting Rottenberg’s invariance principle.

Suggested Citation

  • Jennifer K. Ashcraft & Craig A. Depken, 2020. "The introduction of the reserve clause in Major League Baseball: evidence of its impact on select player salaries during the 1880s," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 14(1), pages 105-128, January.
    • Handle: RePEc:afc:cliome:v:14:y:2020:i:1:p:105-128
    DOI: 10.1007/s11698-019-00183-0
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    1. Bradbury, John Charles, 2017. "Monopsony and competition: The impact of rival leagues on player salaries during the early days of baseball," Explorations in Economic History, Elsevier, vol. 65(C), pages 55-67.

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    More about this item

    Keywords

    Sports economics; Monopsony; Free agency; Negotiation;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913

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