Document Type

Working Paper

Date of This Version

5-1-2017

Keywords

compensation, incentives, labor markets, baseball

JEL Classification

J24, J31, L83, Z22

Abstract

This study examines the changes in player compensation in Major League Baseball during the last three decades. Specifically, we examine the extent to which recently documented changes in players’ compensation structure based on certain types of productivity fits in with the longer term trends in compensation, and identify the value of specific output activities in different time periods. We examine free agent contracts in three-year periods across three decades and find changes to which players’ performance measures are significantly rewarded in free agency. We find evidence that the compensation strategies of baseball teams increased the rewards to “power” statistics like home runs and doubles in the 1990s when compared to a model that focused on successfully reaching base with a batted ball without a significant regard for the number of bases reached. Similarly, we confirm and expand upon the increased financial return to bases-on-balls in the late 2000s as found in previous research.

Working Paper Number

1702

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