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Leveling the Playing Field or Just Lowering Salaries? The Effects of Redistribution in Baseball

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Author Info

  • John L. Solow

    ()
    (Department of Economics, University of Iowa)

  • Anthony C. Krautmann

    ()
    (Department of Economics, DePaul University)

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    Abstract

    In an attempt to even the playing field, Major League Baseball has considered a number of different redistribution programs. To successfully address the problem of imbalance in the league, redistribution must affect teams' marginal revenue functions. Previous theoretical work has shown that efforts to redistribute revenues from rich to poor teams will lower the marginal value of winning of all teams, thus reducing the payments to labor. But it remains an empirical question as to whether the net effects of such programs have improved balance. In this paper we provide an empirical assessment of whether redistributive efforts between 1996 and 2001 succeeded in reallocating talent to less advantaged teams by estimating the effect of redistribution on the marginal revenue functions of small- and large-market teams. Our results indicate that redistribution lowered salaries by approximately 22% without affecting league balance.

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    Bibliographic Info

    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 73 (2007)
    Issue (Month): 4 (April)
    Pages: 947–958

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    Handle: RePEc:sej:ancoec:v:73:4:y:2007:p:947-958

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    Web page: http://www.southerneconomic.org/
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    Cited by:
    1. Rockerbie, Duane W, 2012. "Exploring inter-league parity in North America: the NBA anomaly," MPRA Paper 43088, University Library of Munich, Germany.
    2. Richard Cebula, 2013. "A panel data analysis of the impacts of regional economic factors, marketing and promotions, and team performance on minor league baseball attendance," The Annals of Regional Science, Springer, vol. 51(3), pages 695-710, December.

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