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The relationship between payroll and performance disparity in major league baseball: an alternative measure

Author

Listed:
  • Daniel Mizak

    (Frostburg State University)

  • Anthony Stair

    (Frostburg State University)

Abstract

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.

Suggested Citation

  • Daniel Mizak & Anthony Stair, 2004. "The relationship between payroll and performance disparity in major league baseball: an alternative measure," Economics Bulletin, AccessEcon, vol. 12(9), pages 1-14.
    • Handle: RePEc:ebl:ecbull:eb-04l80001
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    References listed on IDEAS

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    Cited by:

    1. Daniel Mizak & Anthony Stair & John Neral, 2007. "The adjusted churn: an index of competitive balance for sports leagues based on changes in team standings over time," Economics Bulletin, AccessEcon, vol. 26(3), pages 1-7.
    2. Richard Evans, 2014. "A review of measures of competitive balance in the ‘analysis of competitive balance’ literature," Birkbeck Sports Business Centre Working Papers 9, Birkbeck College, Department of Management.
    3. repec:ebl:ecbull:v:26:y:2007:i:3:p:1-7 is not listed on IDEAS
    4. Kim, Seungmo & Andrew, Damon P.S., 2013. "Organizational justice in intercollegiate athletics: Perceptions of coaches," Sport Management Review, Elsevier, vol. 16(2), pages 200-210.
    5. yamamura, eiji, 2006. "Team Payroll, Competitive Balance, and Team Performance in the Japan Professional Baseball League: A Study using 1993-2004 Panel Data," MPRA Paper 10836, University Library of Munich, Germany.

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    JEL classification:

    • L8 - Industrial Organization - - Industry Studies: Services
    • Z0 - Other Special Topics - - General

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