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The impact of the luxury tax on competitive balance in Major League Baseball

Author

Listed:
  • Olugbenga Ajilore

    (University of Toledo)

  • Joshua Hendrickson

    (Wayne State University of Toledo)

Abstract

There has been much discussion recently in the world of professional sports about competitive balance. As more is focused on the growing disparity between large market and small market teams, one must ask whether the luxury tax, as implemented by Major League Baseball, has had its intended effect. This paper adds to the literature on competitive balance by developing measures to quantify competitiveness at the individual team-level. We estimate a model analyzing the impact of the luxury tax on competitive balance. The results show that the luxury tax is beginning to have the intended impact on competitive balance.

Suggested Citation

  • Olugbenga Ajilore & Joshua Hendrickson, 2007. "The impact of the luxury tax on competitive balance in Major League Baseball," Working Papers 0727, International Association of Sports Economists;North American Association of Sports Economists.
    • Handle: RePEc:spe:wpaper:0727
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    File URL: http://web.holycross.edu/RePEc/spe/AjiloreHendrickson_LuxuryTax.pdf
    File Function: Paper presented at the 7th Annual IASE Conference in Ottawa, Ontario, June 2005
    Download Restriction: no
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    Cited by:

    1. Helmut M. Dietl & Markus Lang & Stephan Werner, 2010. "The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues," International Journal of Sport Finance, Fitness Information Technology, vol. 5(1), pages 41-51, February.
    2. Daniel Nicolae MAITA & Alexandra-Irina PADUREAN (BADEA) & Claudiu CRETU & Vasile APOSTOL, 2021. "Salary Cap Model €“ Influence Of Sports Leagues Competitiveness €“ National Basketball Association Vs National Hockey League In North America," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(1), pages 185-194, November.

    More about this item

    Keywords

    sports economics; Major League Baseball; Luxury Tax;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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