Pay inequalities and team performance - Empirical evidence from the North American major leagues

  • Frick B
  • Prinz J
  • Winkelmann K
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Abstract

Wage disparities and their consequences have long been a topic of
economic research. While most papers focus on describing the development
of wage differentials over time and seek to identify the reasons for the
observed Patterns, few attempts have been made to analyze the influence
of pay inequality on economic outcomes. A unique and rather large data
set from the North American team sports industry is used to address the
question how wage disparities affect the performance of professional
teams. First, changes in intra- and inter-team wage inequality are
documented Second, the impact of wage inequality on team performance is
directly analyzed Overall, the results differ to a considerable degree
between the four major leagues, suggesting that the relative importance
of high-powered incentives and cooperation is different in football and
hockey from basketball and baseball.

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Authors

  • B Frick

  • J Prinz

  • K Winkelmann

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