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The Upside Potential of Hiring Risky Workers: Evidence from the Baseball Industry

Author

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  • Christopher R. Bollinger

    (University of Kentucky)

  • Julie L. Hotchkiss

    (Georgia State University and the Federal Reserve Bank of Atlanta)

Abstract

Making use of performance data for baseball players, this article provides empirical evidence in support of Lazear's (1998) theoretical predictions that (1) risky workers will earn a premium for their upside potential, (2) this risk premium will be higher the longer a worker's work life, and (3) firms must enjoy some comparative advantage in the labor market to be willing to pay a premium to risky workers. The validity of Lazear's predictions carries implications for wage differentials between young and old workers and between men and women.

Suggested Citation

  • Christopher R. Bollinger & Julie L. Hotchkiss, 2003. "The Upside Potential of Hiring Risky Workers: Evidence from the Baseball Industry," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 923-944, October.
    • Handle: RePEc:ucp:jlabec:v:21:y:2003:i:4:p:923-944
    DOI: 10.1086/377027
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    Cited by:

    1. Daniel A. Rascher & John Paul G. Solmes, 2007. "Do Fans Want Close Contests? A Test of the Uncertainty of Outcome Hypothesis in the National Basketball Association," International Journal of Sport Finance, Fitness Information Technology, vol. 2(3), pages 130-141, August.
    2. Anil Özdemir & Helmut Dietl & Giambattista Rossi & Rob Simmons, 2022. "Are workers rewarded for inconsistent performance?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(2), pages 137-151, April.
    3. Barbara Arel & Michael J. Tomas III, 2012. "The NBA Draft," Journal of Sports Economics, , vol. 13(3), pages 223-249, June.
    4. Oyer, Paul & Schaefer, Scott, 2011. "Personnel Economics: Hiring and Incentives," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 20, pages 1769-1823, Elsevier.
    5. Camelia M. Kuhnen & Paul Oyer, 2016. "Exploration for Human Capital: Evidence from the MBA Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 255-286.
    6. Edward P. Lazear & Paul Oyer, 2012. "Personnel Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    7. Edward P. Lazear, 1995. "Personnel Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121883, December.
    8. W. David Allen, 2015. "The Demand for Younger and Older Workers," Journal of Sports Economics, , vol. 16(2), pages 127-158, February.
    9. Rachel Scarfe & Carl Singleton & Adesola Sunmoni & Paul Telemo, 2024. "The age‐wage‐productivity puzzle: Evidence from the careers of top earners," Economic Inquiry, Western Economic Association International, vol. 62(2), pages 584-606, April.
    10. Cornaglia, Francesca & Feldman, Naomi E., 2011. "Productivity, Wages, and Marriage: The Case of Major League Baseball," IZA Discussion Papers 5695, Institute of Labor Economics (IZA).
    11. Anil Özdemir & Helmut Dietl & Giambattista Rossi & Robert Simmons, 2020. "Are Workers Rewarded for Inconsistent Performance?," Working Papers 386, University of Zurich, Department of Business Administration (IBW).
    12. Anthony C. Krautmann, 2017. "Risk-Averse Team Owners and Players’ Salaries in Major League Baseball," Journal of Sports Economics, , vol. 18(1), pages 19-33, January.
    13. John D. Burger & Stephen J. K. Walters, 2008. "The Existence and Persistence of a Winner's Curse: New Evidence from the (Baseball) Field," Southern Economic Journal, John Wiley & Sons, vol. 75(1), pages 232-245, July.
    14. Carl T. Kitchens, 2015. "Are Winners Promoted Too Often? Evidence From The Nfl Draft 1999–2012," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1317-1330, April.
    15. Schmidt, Martin B., 2021. "Risk and uncertainty in team building: Evidence from a professional basketball market," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 735-753.
    16. Peter Groothuis & Richard Hill & Timothy Perri, 2004. "Early Entry in the NBA Draft: The Influence of Unraveling, Human Capital and Option Value," Working Papers 04-05, Department of Economics, Appalachian State University, revised 2005.
    17. Akira Motomura, 2016. "MoneyRoundball? The Drafting of International Players by National Basketball Association Teams," Journal of Sports Economics, , vol. 17(2), pages 175-206, February.
    18. Peter A. Groothuis & James Richard Hill & Timothy J. Perri, 2007. "Early Entry in the NBA Draft," Journal of Sports Economics, , vol. 8(3), pages 223-243, June.
    19. Helmut Dietl & Markus Lang & Johannes Orlowski & Philipp Wegelin, 2023. "The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets," Working Papers 398, University of Zurich, Department of Business Administration (IBW).
    20. Eric Fesselmeyer, 2021. "The impact of temperature on labor quality: Umpire accuracy in Major League Baseball," Southern Economic Journal, John Wiley & Sons, vol. 88(2), pages 545-567, October.
    21. Christian Deutscher & Oliver Gürtler & Joachim Prinz & Daniel Weimar, 2017. "The Payoff To Consistency In Performance," Economic Inquiry, Western Economic Association International, vol. 55(2), pages 1091-1103, April.
    22. Florian L. Kutzner & Daniel Read & Neil Stewart & Gordon Brown, 2017. "Choosing the Devil You Don’t Know: Evidence for Limited Sensitivity to Sample Size–Based Uncertainty When It Offers an Advantage," Management Science, INFORMS, vol. 63(5), pages 1519-1528, May.

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