The relationship between payroll and performance disparity in major league baseball: an alternative measure
This paper introduces an alternative method of measuring competitive balance in major league baseball and employs it to assess both payroll (talent) disparity and performance (wins) disparity for 30 selected years between 1929 and 2002. Attention is devoted to the impact of two critical events in the evolution of the game: the influx of non-white players and the advent of free agency. The joint effect of these events was to increase payroll disparity while simultaneously reducing performance disparity. A single equation regression model found the effect of payroll disparity on wins disparity in the post free agency period to be positive and significant. The increasing disparity in payrolls since the mid 1990s, particularly in the American League, suggests that the luxury tax has been ineffectual and that greater performance disparity can be expected in the near future.
Volume (Year): 12 (2004)
Issue (Month): 9 ()
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- Martin Schmidt & David Berri, 2002. "Competitive Balance and Market Size in Major League Baseball: A Response to Baseball's Blue Ribbon Panel," Review of Industrial Organization, Springer, vol. 21(1), pages 41-54, August.
- Joshua Utt & Rodney Fort, 2002. "Pitfalls to Measuring Competitive Balance With Gini Coefficients," Journal of Sports Economics, , vol. 3(4), pages 367-373, November.
- Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
- Martin B. Schmidt & David J. Berri, 2003. "On the Evolution of Competitive Balance: The Impact of an Increasing Global Search," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 692-704, October.
- Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64, pages 242.
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