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The Contract Year Phenomenon Revisited: Heterogeneous Performance Responses in Major League Baseball

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  • Atkins, Matt
  • Dikgang, Johane

Abstract

This study re-examines whether the performance of Major League Baseball batters changes in contract years. Using a panel of 3,654 player-season observations covering 1,003 players from 2015 to 2025, we estimate two-way fixed effects models with expected weighted on-base average (xwOBA) as the primary measure of performance. Pooled across all players, the contract-year coefficient is statistically indistinguishable from zero and is equivalent to zero within economically meaningful bounds. Disaggregating by career stage, however, reveals substantial heterogeneity: players with five or more years of major league service post xwOBA approximately six points higher in contract years, whereas players further from eligibility show no response (.. = .004 for the difference). Among veterans, the response is localized to the contract year rather than adjacent seasons, survives survivorship and selection diagnostics, and is most precisely estimated in freeagency years. These findings reconcile a literature in which veteran-restricted samples detected contract-year effects and broader samples did not.

Suggested Citation

  • Atkins, Matt & Dikgang, Johane, 2026. "The Contract Year Phenomenon Revisited: Heterogeneous Performance Responses in Major League Baseball," GLO Discussion Paper Series 1835, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1835
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    Keywords

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    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues

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