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Productivity under Large Pay Increases: Evidence from Professional Baseball

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  • Papps, Kerry L.

    ()
    (University of Bath)

Abstract

The establishment of the free agency system in the 1970s resulted in large salary increases among professional baseball players. Historical data show that players have tended to perform better at early stages of their careers since free agency was introduced. Under the current salary bargaining system, players only become eligible for salary arbitration and free agency at predetermined points in their careers, resulting in sudden changes in salary growth rates at these points. Using data on official days of major league service, it is found that players with high expected salary growth perform better, consistent with efficiency wage theory.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5133.

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Length: 29 pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5133

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Keywords: efficiency wages; productivity; baseball;

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References

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  1. Enrico Moretti & Jeffrey M. Perloff, 2002. "Efficiency Wages, Deferred Payments, and Direct Incentives in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(4), pages 1144-1155.
  2. Tuomas Pekkarinen & Chris Riddell, 2008. "Performance Pay and Earnings: Evidence from Personnel Records," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 61(3), pages 297-319, April.
  3. Orana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social preferences and the response to incentives: Evidence from personnel data," Natural Field Experiments 00212, The Field Experiments Website.
  4. Wadhwani, Sushil B & Wall, Martin, 1991. "A Direct Test of the Efficiency Wage Model Using UK Micro-data," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 529-48, October.
  5. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(2), pages 533-575, May.
  6. Scott M. Fuess & Meghan Millea, 2002. "Do Employers Pay Efficiency Wages? Evidence from Japan," Journal of Labor Research, Transaction Publishers, vol. 23(2), pages 278-292, April.
  7. Brian A. Jacob & Lars Lefgren, 2004. "Remedial Education and Student Achievement: A Regression-Discontinuity Analysis," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 226-244, February.
  8. Blass, Asher A, 1992. "Does the Baseball Labor Market Contradict the Human Capital Model of Investment?," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 261-68, May.
  9. Booth, Alison L & Frank, Jeff, 1999. "Earnings, Productivity, and Performance-Related Pay," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(3), pages 447-63, July.
  10. Anne Gielen & Marcel Kerkhofs & Jan Ours, 2010. "How performance related pay affects productivity and employment," Journal of Population Economics, Springer, vol. 23(1), pages 291-301, January.
  11. Gould, Eric D. & Winter, Eyal, 2007. "Interactions Between Workers and the Technology of Production: Evidence from Professional Baseball," IZA Discussion Papers 3096, Institute for the Study of Labor (IZA).
  12. Levine, David I, 1992. "Can Wage Increases Pay for Themselves? Tests with a Production Function," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 102(414), pages 1102-15, September.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Do pay increases make athletes more productive?
    by Ariel Goldring in Free Market Mojo on 2010-08-31 16:45:07

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