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Productivity under Large Pay Increases: Evidence from Professional Baseball

Author

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  • Papps, Kerry L.

    (University of Bradford)

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.

Suggested Citation

  • Papps, Kerry L., 2010. "Productivity under Large Pay Increases: Evidence from Professional Baseball," IZA Discussion Papers 5133, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp5133
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    References listed on IDEAS

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    1. Do pay increases make athletes more productive?
      by Ariel Goldring in Free Market Mojo on 2010-08-31 21:45:07

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    Keywords

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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