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Using an Empirically Estimated Production Function for Major League Baseball to Examine Worker Disincentives Associated with Multi-Year Contracts

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  • Mark D. Woolway

Abstract

This paper uses cross-sectional data from the 1993 Major League Baseball season to derive the production function for the industry. Using that function, the hypothesis that employee productivity drops in response to the job security of a multi-year contract is test ed by comparing the marginal products of players in the year preceding and the year following the signing of a multi-year contract. I find that the production function for Major League Baseball exhibits increasing returns to scale and, contrary to the popular belief of observers of the sport, hitting is more important to team success than pitching. I also find compelling, statistically significant evidence of worker disincentives associated with multi-year contracts.

Suggested Citation

  • Mark D. Woolway, 1997. "Using an Empirically Estimated Production Function for Major League Baseball to Examine Worker Disincentives Associated with Multi-Year Contracts," The American Economist, Sage Publications, vol. 41(2), pages 77-83, October.
    • Handle: RePEc:sae:amerec:v:41:y:1997:i:2:p:77-83
    DOI: 10.1177/056943459704100210
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    References listed on IDEAS

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    1. Krohn, Gregor A, 1983. "Measuring the Experience-Productivity Relationship: The Case of Major League Baseball," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(4), pages 273-279, October.
    2. Charles E. Zech, 1981. "An Empirical Estimation of a Production Function: The Case of Major League Baseball," The American Economist, Sage Publications, vol. 25(2), pages 19-23, October.
    3. Kahn, Lawrence M, 1993. "Free Agency, Long-Term Contracts and Compensation in Major League Baseball: Estimates from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 157-164, February.
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    Cited by:

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    2. Joshua Congdon-Hohman & Jonathan A. Lanning, 2013. "Workers' Responses to Incentives: The Case of Pending MLB Free Agents," Working Papers 1304, College of the Holy Cross, Department of Economics.
    3. Kevin J. Stiroh, 2007. "Playing For Keeps: Pay And Performance In The Nba," Economic Inquiry, Western Economic Association International, vol. 45(1), pages 145-161, January.
    4. Fumarco, Luca & Longley, Neil & Palermo, Alberto & Rossi, Giambattista, 2024. "Strategic Behaviours in a Labour Market with Mobility-Restricting Contractual Provisions: Evidence from the National Hockey League," IZA Discussion Papers 16836, Institute of Labor Economics (IZA).
    5. Joshua M. Congdon-Hohman & Jonathan A. Lanning, 2018. "Beyond Moneyball," Journal of Sports Economics, , vol. 19(7), pages 1046-1061, October.

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