IDEAS home Printed from https://ideas.repec.org/a/gam/jijfss/v3y2015i2p75-83d47337.html
   My bibliography  Save this article

The NBA’s Maximum Player Salary and the Distribution of Player Rents

Author

Listed:
  • Kelly M. Hastings

    (Department of Economics, Berry College, Box 5024, Mount Berry, GA 30149, USA)

  • Frank Stephenson

    (Department of Economics, Berry College, Box 5024, Mount Berry, GA 30149, USA)

Abstract

The NBA’s 1999 Collective Bargaining Agreement (CBA) included provisions capping individual player pay in addition to team payrolls. This study examines the effect the NBA’s maximum player salary on player rents by comparing player pay from the 1997–1998 and 2003–2004 seasons while controlling for player productivity and other factors related to player pay. The results indicate a large increase in the pay received by teams’ second highest and, to a lesser extent, third highest paid players. We interpret this result as evidence that the adoption of the maximum player salary shifted rents from stars to complementary players. We also show that the 1999 CBA’s rookie contract provisions reduced salaries of early career players.

Suggested Citation

  • Kelly M. Hastings & Frank Stephenson, 2015. "The NBA’s Maximum Player Salary and the Distribution of Player Rents," IJFS, MDPI, vol. 3(2), pages 1-9, March.
    • Handle: RePEc:gam:jijfss:v:3:y:2015:i:2:p:75-83:d:47337
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7072/3/2/75/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7072/3/2/75/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Johnny Ducking & Peter A. Groothuis & James Richard Hill, 2014. "Minimum Pay Scale and Career Length in the NBA," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(4), pages 617-635, October.
    3. Lawrence M. Kahn, 2007. "Markets: Cartel Behavior and Amateurism in College Sports," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 209-226, Winter.
    4. Amy Farmer & Paul Pecorino, 2010. "Is the Coach Paid too Much?: Coaching Salaries and the NCAA Cartel," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 841-862, September.
    5. J. Richard Hill & Peter A. Groothuis, 2001. "The New NBA Collective Bargaining Agreement, the Median Voter Model, and a Robin Hood Rent Redistribution," Journal of Sports Economics, , vol. 2(2), pages 131-144, May.
    6. Jahn K. Hakes & Raymond D. Sauer, 2006. "An Economic Evaluation of the Moneyball Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 173-186, Summer.
    7. David J. Berri & Stacey L. Brook & Bernd Frick & Aju J. Fenn & Roberto Vicente-Mayoral, 2005. "The Short Supply of Tall People: Competitive Imbalance and the National Basketball Association," Journal of Economic Issues, Taylor & Francis Journals, vol. 39(4), pages 1029-1041, December.
    8. John Charles Bradbury, 2007. "Does the Baseball Labor Market Properly Value Pitchers?," Journal of Sports Economics, , vol. 8(6), pages 616-632, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, International Association of Sports Economists;North American Association of Sports Economists.
    2. John Charles Bradbury, 2013. "What Is Right With Scully Estimates of a Player’s Marginal Revenue Product," Journal of Sports Economics, , vol. 14(1), pages 87-96, February.
    3. Daniel R. Marburger, 2015. "How Are Athletic Directors Rewarded in the NCAA Football Bowl Subdivision?," Journal of Sports Economics, , vol. 16(3), pages 254-267, April.
    4. repec:lan:wpaper:3944 is not listed on IDEAS
    5. Hamermesh, Daniel S. & Pfann, Gerard, 2009. "Markets for Reputation: Evidence on Quality and Quantity in Academe," CEPR Discussion Papers 7603, C.E.P.R. Discussion Papers.
    6. Thomas Peeters, 2015. "Profit-Maximizing Gate Revenue Sharing In Sports Leagues," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 1275-1291, April.
    7. David Berri & R. Jewell, 2004. "Wage inequality and firm performance: Professional basketball's natural experiment," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 32(2), pages 130-139, June.
    8. Simmons, Rob & Berri, David J., 2011. "Mixing the princes and the paupers: Pay and performance in the National Basketball Association," Labour Economics, Elsevier, vol. 18(3), pages 381-388, June.
    9. repec:lan:wpaper:3551 is not listed on IDEAS
    10. Frank TENKORANG & Bree L. DORITY & Eddery LAM, 2014. "Nba Endgame: Do Salaries Matter?," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 14, pages 51-62, December.
    11. repec:lan:wpaper:3659 is not listed on IDEAS
    12. Anja Schöttner & Veikko Thiele, 2010. "Promotion Tournaments and Individual Performance Pay," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(3), pages 699-731, September.
    13. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
    14. Peter Kuhn, 1982. "Malfeasance in Long Term Employment Contracts: A New General Model with an Application to Unionism," NBER Working Papers 1045, National Bureau of Economic Research, Inc.
    15. Basak, Suleyman & Makarov, Dmitry, 2012. "Difference in interim performance and risk taking with short-sale constraints," Journal of Financial Economics, Elsevier, vol. 103(2), pages 377-392.
    16. Katsiaryna Bardos & Steven E. Kozlowski & Michael R. Puleo, 2021. "Entrenchment or efficiency? CEO‐to‐employee pay ratio and the cost of debt," The Financial Review, Eastern Finance Association, vol. 56(3), pages 511-533, August.
    17. Kampelmann, Stephan & Rycx, François, 2012. "The impact of educational mismatch on firm productivity: Evidence from linked panel data," Economics of Education Review, Elsevier, vol. 31(6), pages 918-931.
    18. Shinhye Chang & Rangan Gupta & Stephen M. Miller, 2018. "Causality Between Per Capita Real GDP and Income Inequality in the U.S.: Evidence from a Wavelet Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 135(1), pages 269-289, January.
    19. Laurent Franckx & Isabelle Brose, 2004. "A theoretical framework for incentives in the public sector," Economics Bulletin, AccessEcon, vol. 10(2), pages 1-8.
    20. Ahrens, Jan-Philipp & Landmann, Andreas & Woywode, Michael, 2015. "Gender preferences in the CEO successions of family firms: Family characteristics and human capital of the successor," Journal of Family Business Strategy, Elsevier, vol. 6(2), pages 86-103.
    21. Hoffmann, Magnus & Kolmar, Martin, 2017. "Distributional preferences in probabilistic and share contests," Journal of Economic Behavior & Organization, Elsevier, vol. 142(C), pages 120-139.
    22. Martins, Pedro S., 2008. "Dispersion in wage premiums and firm performance," Economics Letters, Elsevier, vol. 101(1), pages 63-65, October.
    23. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijfss:v:3:y:2015:i:2:p:75-83:d:47337. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.