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Who pays for minor league training costs?

Author

Listed:
  • AC. Krautmann
  • E. Gustafson
  • L. Hadley

Abstract

As an alternative to monopsonistic exploitation, the underpayment of players in major league baseball may be explained as the attempt by owners to recoup general training expenses. In this article, a method is proffered for estimating the 'surplus' extracted from those players restricted by the reserve clause, where this surplus is defined as the difference between what the player is actually paid and what he would have received if he were a free agent. These estimates are then used to examine how the surplus varies across players. The results suggest a number of interesting aspects of the recovery of minor league training costs, monopsony exploitation, and the distribution of the surplus across players. First, owners only extract a surplus from 'apprentices' (i.e., those young players who are ineligible for salary arbitration). Second, the largest surpluses are extracted from those who cost the least to train. In fact, the surplus generated by star apprentices is about twice that of mediocre apprentices. Finally, the results suggest that the surplus extracted from minority apprentices is 10-15% higher than that extracted from white apprentices. Copyright 2000 Western Economic Association International.

Suggested Citation

  • AC. Krautmann & E. Gustafson & L. Hadley, 2000. "Who pays for minor league training costs?," Contemporary Economic Policy, Western Economic Association International, vol. 18(1), pages 37-47, January.
  • Handle: RePEc:bla:coecpo:v:18:y:2000:i:1:p:37-47
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    References listed on IDEAS

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    1. Paul M. Sommers & Noel Quinton, 1982. "Pay and Performance in Major League Baseball: The Case of the First Family of Free Agents," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 426-436.
    2. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
    3. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242-242.
    4. James R. Chelius & James B. Dworkin, 1980. "An Economic Analysis of Final-Offer Arbitration as a Conflict Resolution Device," Journal of Conflict Resolution, Peace Science Society (International), vol. 24(2), pages 293-310, June.
    5. Lawrence M. Kahn, 1991. "Discrimination in Professional Sports: A Survey of the Literature," ILR Review, Cornell University, ILR School, vol. 44(3), pages 395-418, April.
    6. David S. Davenport, 1969. "Collusive Competition in Major League Baseball its Theory and Institutional Development," The American Economist, Sage Publications, vol. 13(2), pages 6-30, October.
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    Cited by:

    1. Holmes, Paul, 2011. "New evidence of salary discrimination in major league baseball," Labour Economics, Elsevier, vol. 18(3), pages 320-331, June.
    2. Roger D. Blair & Brad R. Humphreys & Hyunwoong Pyun, 2017. "Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000–2011," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(5), pages 676-688, July.
    3. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
    4. 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.

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