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A Note on the Structural Stability of Salary Equations

Author

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  • Anthony C. Krautmann
  • Elizabeth Gustafson
  • Lawrence Hadley

Abstract

The salaries of major league baseball players is a common subject for analysis in the sports economics literature. Although hitters and pitchers represent two separate groups, each of these two groups of players is assumed to be homogeneous so that aggregation within each group is appropriate. However, there are always potential problems associated with aggregation. If there are important differences between starters, long relievers, and stoppers that relate to their pitching skills and/or to their function in the production of team wins, then aggregation may lead to inaccurate conclusions regarding the determinants of their earnings. In this article, the authors examine the issue of aggregating the pitching input. By comparing a collective earnings equation for all pitchers with separate earnings equations for each type of pitcher, the authors find that the structure of salary rewards differs significantly between the groups. As such, the authors conclude that it is not appropriate to aggregate pitchers when analyzing the determinants of salaries.

Suggested Citation

  • Anthony C. Krautmann & Elizabeth Gustafson & Lawrence Hadley, 2003. "A Note on the Structural Stability of Salary Equations," Journal of Sports Economics, , vol. 4(1), pages 56-63, February.
    • Handle: RePEc:sae:jospec:v:4:y:2003:i:1:p:56-63
    DOI: 10.1177/1527002502239658
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    References listed on IDEAS

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    1. Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-381, April.
    2. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
    3. AC. Krautmann & E. Gustafson & L. Hadley, 2000. "Who pays for minor league training costs?," Contemporary Economic Policy, Western Economic Association International, vol. 18(1), pages 37-47, January.
    4. Blass, Asher A, 1992. "Does the Baseball Labor Market Contradict the Human Capital Model of Investment?," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 261-268, May.
    5. Kahn, Lawrence M, 1993. "Free Agency, Long-Term Contracts and Compensation in Major League Baseball: Estimates from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 157-164, February.
    6. Donald J. Cymrot, 1985. "Does Competition Lessen Discrimination? Some Evidence," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 605-612.
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    Cited by:

    1. Lisa A. Giddings & Michael Haupert, 2019. "Earning Like a Woman: Salaries versus Marginal Revenue Products in the AAGBPL and MLB: 1947-1952," Journal of Sports Economics, , vol. 20(2), pages 198-217, February.
    2. Holmes, Paul, 2011. "New evidence of salary discrimination in major league baseball," Labour Economics, Elsevier, vol. 18(3), pages 320-331, June.
    3. Christopher A. Parsons & Johan Sulaeman & Michael C. Yates & Daniel S. Hamermesh, 2007. "Strike Three: Umpires' Demand for Discrimination," NBER Working Papers 13665, National Bureau of Economic Research, Inc.
    4. Roberto Pedace & Curtis M. Hall, 2012. "Home Safe: No-Trade Clauses and Player Salaries in Major League Baseball," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 627-644, July.
    5. John Charles Bradbury, 2007. "Does the Baseball Labor Market Properly Value Pitchers?," Journal of Sports Economics, , vol. 8(6), pages 616-632, December.
    6. 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.
    7. Haupert, Michael & Murray, James, 2011. "Regime Switching and Wages in Major League Baseball under the Reserve Clause," MPRA Paper 29094, University Library of Munich, Germany.
    8. James Alm & William H. Kaempfer & Edward Batte Sennoga, 2012. "Baseball Salaries and Income Taxes," Journal of Sports Economics, , vol. 13(6), pages 619-634, December.

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