Productivity under large pay increases: Evidence from professional baseball

Research output: Working paperDiscussion paper

Abstract

The establishment of the free agency system in the 1970s resulted in large salary increases among professional baseball players. Historical data show that players have tended to perform better at early stages of their careers since free agency was introduced. Under the current salary bargaining system, players only become eligible for salary arbitration and free agency at predetermined points in their careers, resulting in sudden changes in salary growth rates at these points. Using data on official days of major league service, it is found that players with high expected salary growth perform better, consistent with efficiency wage theory.
Original languageEnglish
PublisherIZA Institute for the Study of Labor
Pages1-26
Publication statusPublished - Aug 2010

Publication series

NameIZA Discussion Paper Series
PublisherIZA Institute of Labor Economics
No.5133
ISSN (Electronic)2365-9793

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