Ownership of property-rights and the allocation of talents

Abstract

Under the reserve-clause system that assigns the property-rights on the Major League Baseball players’ services to teams, player transfers are negotiated between teams without the involvement of players. In contrast, under the current free-agency system, players with free-agent status negotiate directly with potential suitors. Thus, the system assigns the property-rights to players. Using data extracted from the Baseball Archive (http://baseball1.com), this article examines the effect of the change in the property-rights assignment on the allocation of talents across teams. We find that the change increased large-market teams’ shares of veteran all-star players and the concentration of senior players.

Notes

¹The dataset is downloadable from http://baseball1.com

²Our estimation results show that the estimates are not sensitive to whether we use a balanced or an unbalanced panel. However, due to the decline in sample size, some of the coefficients indeed become statistically insignificant even at the 10% level for the NL if the balanced sample is used.

³The slugging percentage is defined as (total bases)/(total number at-bats). Strike-out-walk ratio = (total number of strike outs)/(total number of walk-on-balls).

⁴There are two leagues in the US MLB, the American League and the National League. In the middle of each baseball season since 1933, an all-star team has been selected for each league. The teams were originally selected jointly by managers and fans for the 1933 and 1934 season. In 1935–1946, the all-star teams were selected solely by managers. From 1947 to 1957, fans chose the the starting lineup and managers chose the remaining players. Between 1958 and 1969, managers, players and coaches made the all-star team selections. In 1970, the vote again returned to fans for the selection of starters and remains there today. Normally, each team sends at least one player to the all-star teams.

⁵Data source: various issues of Broadcasting & Cable, compiled by Rodney Fort.

⁶Since the start of the all-star games, only three teams failed to send at least one player to the all-star team, they are Philadelphia Phillies in 1934 and 1945, Brooklyn Dodgers (now, Los Angeles Dodgers) in 1935, Cincinnati Reds in 1934.