The Causality between Salary Structures and Team Performance: A Panel Analysis in a Professional Baseball League
AbstractThis paper provides a comprehensive study of the causality between pay and performance for professional sports teams. By using the total salary payment, as well as the dispersion of salary payment of the baseball teams in Taiwan, we engage in a simultaneous regression of a Granger Causality Test for each team’s salary structures and their corresponding performance. Our empirical results show that the causality only runs from the dispersion of salary payment to team performance, and not vice versa. As such, both the tournament hypothesis, which emphasizes the effect of salary dispersion, and the Yankee paradox, which proposes the negative externality for a team with high payroll, are thus confirmed. The one-way causality results suggest that teams must rely more on internal wage adjustments, especially on the dispersion of salary, under the league with strict restrictions on the mobility of players.
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Volume (Year): 4 (2009)
Issue (Month): 2 (May)
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- Le Maux, Benoit & Rocaboy, Yvon, 2012.
"A simple microfoundation for the utilization of fragmentation indexes to measure the performance of a team,"
Economics Letters, Elsevier,
Elsevier, vol. 116(3), pages 491-493.
- Benoît Le Maux & Yvon Rocaboy, 2011. "A simple microfoundation for the utilization of fragmentation indexes to measure the performance of a team," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS, Condorcet Center for political Economy 2011-02-ccr, Condorcet Center for political Economy.
- Jane, Wen-Jhan, 2010. "Raising salary or redistributing it: A panel analysis of Major League Baseball," Economics Letters, Elsevier, Elsevier, vol. 107(2), pages 297-299, May.
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