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Productive Efficiency and Salary Distribution: The Case of US Major League Baseball

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  • R. Todd jewell
  • David J. Molina

Abstract

Recent theoretical research suggests that a firm's salary structure can affect the firm's productivity. We investigate the relationship between payroll inequality and production using US Major League Baseball data. Employing panel data methods, this study finds that salary inequality has a significantly negative effect on team success. A general result is that team success in term of wins does not seem to be correlated with efficiency; specifically, some of the least successful teams are also some of the most efficient. In addition, salary inequality does not appear to be correlated with efficiency. Furthermore, revenues generated by teams are not necessarily correlated with team efficiency.

Suggested Citation

  • R. Todd jewell & David J. Molina, 2004. "Productive Efficiency and Salary Distribution: The Case of US Major League Baseball," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(1), pages 127-142, February.
    • Handle: RePEc:bla:scotjp:v:51:y:2004:i:1:p:127-142
    DOI: 10.1111/j.0036-9292.2004.05101008.x
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    Cited by:

    1. Xing Lu & Jason Matthews & Miao Wang & Hong Zhuang, 2018. "Team payroll, pitcher and hitter payrolls and team performance: Evidence from the U.S. Major League Baseball," Economics and Business Letters, Oviedo University Press, vol. 7(2), pages 62-69.
    2. Egon Franck & Stephan Nüesch, 2007. "Wage Dispersion and Team Performance - An Empirical Panel Analysis," Working Papers 0073, University of Zurich, Institute for Strategy and Business Economics (ISU).
    3. Kevin Kniffin, 2009. "Evolutionary perspectives on salary dispersion within firms," Journal of Bioeconomics, Springer, vol. 11(1), pages 23-42, April.
    4. Hsuan-Yu Lin & Chih-Hai Yang, 2016. "Uncertainty, specific investment, and contract duration: evidence from the MLB player market," Empirical Economics, Springer, vol. 50(3), pages 1009-1028, May.
    5. Dennis Coates & Bernd Frick & Todd Jewell, 2016. "Superstar Salaries and Soccer Success," Journal of Sports Economics, , vol. 17(7), pages 716-735, October.
    6. Carlo Bellavite Pellegrini & Raul Caruso & Marco Di Domizio, 2021. "Relative wages, payroll structure and performance in soccer. Evidence from Italian Serie A (2007-2019)," DISCE - Quaderni del Dipartimento di Politica Economica dipe0015, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    7. Ira Horowitz & Jim Lackritz, 2012. "Jolting Joe and Charlie Hustle: The Immediate Economic Impact of an Extended Hitting Streak," The American Economist, Sage Publications, vol. 57(1), pages 42-49, May.
    8. Thadeu Gasparetto & Angel Barajas, 2022. "Wage Dispersion and Team Performance: The Moderation Role of Club Size," Journal of Sports Economics, , vol. 23(5), pages 548-566, June.
    9. Fullerton, Steven L. & Fullerton, Thomas M., Jr. & Walke, Adam G., 2014. "An Econometric Analysis of the 2013 Major League Baseball Season," MPRA Paper 59593, University Library of Munich, Germany, revised 11 Mar 2014.
    10. Todd Jewell, 2014. "Major league soccer in the USA," Chapters, in: John Goddard & Peter Sloane (ed.), Handbook on the Economics of Professional Football, chapter 21, pages 351-367, Edward Elgar Publishing.
    11. Anna Bykova & Dennis Coates, 2020. "Does Experience Matter? Salary Dispersion, Coaching, And Team Performance," Contemporary Economic Policy, Western Economic Association International, vol. 38(1), pages 188-205, January.
    12. Caruso, Raul & Carlo, Bellavite Pellegrini & Marco, Di Domizio, 2016. "Does diversity in the payroll affect soccer teams’ performance? Evidence from the Italian Serie A," MPRA Paper 75644, University Library of Munich, Germany.
    13. Hajime Katayama & Hudan Nuch, 2011. "A game-level analysis of salary dispersion and team performance in the national basketball association," Applied Economics, Taylor & Francis Journals, vol. 43(10), pages 1193-1207.
    14. Marco Di Domizio & Carlo Bellavite Pellegrini & Raul Caruso, 2022. "Payroll dispersion and performance in soccer: A seasonal perspective analysis for Italian Serie A (2007–2021)," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 513-525, July.
    15. Deepak Srivastav & Puram Praveen & Rudra Sensarma & Anand Gurumurthy, 2021. "Does salary dispersion affect team performance in cricket? Evidence from the Indian Premier League," Working papers 441, Indian Institute of Management Kozhikode.
    16. David Boto‐García & Carlos Varela‐Quintana & Alvaro Muñiz, 2023. "Foreign players, team production, and technical efficiency: Evidence from European soccer," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1209-1241, October.
    17. Wen-Jhan Jane & Wei-Hsin Kong & Yi-Hsiue Wang, 2010. "Individual efficiency and club performance: a panel analysis of professional baseball," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 363-372.
    18. Annala, Christopher N. & Winfree, Jason, 2011. "Salary distribution and team performance in Major League Baseball," Sport Management Review, Elsevier, vol. 14(2), pages 167-175, May.
    19. Craig A. Depken & Jeff Lureman, 2018. "Wage Disparity, Team Performance, And The 2005 Nhl Collective Bargaining Agreement," Contemporary Economic Policy, Western Economic Association International, vol. 36(1), pages 192-199, January.
    20. Wen-Jhan Jane, 2013. "Overpayment and Reservation Salary in the Nippon Professional Baseball League," Journal of Sports Economics, , vol. 14(6), pages 563-583, December.
    21. Szymanski, Stefan & Wilkinson, Guy, 2016. "Testing the O-Ring theory using data from the English Premier League," Research in Economics, Elsevier, vol. 70(3), pages 468-481.

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