Revenue sharing and within-team payroll inequality in Major League Baseball

Abstract

Using data from the 2000 to 2012 Major League Baseball seasons, this article investigates how changes to revenue sharing in the 2007 collective bargaining agreement altered within-team payroll inequality. Results indicate that inequality within teams decreased after the 2007 bargaining agreement. This reduced inequity is concentrated among those teams that were already experiencing relatively higher levels of inequality. This indicates that changes to revenue sharing should help increase competitive balance within the league. Additionally, the reduction in inequality occurs only among hitters and not pitchers. These results highlight how collective bargaining can have heterogeneous effects on groups of workers despite there being no requirement of differential treatment.

Keywords:

• MLB
• revenue sharing
• earnings inequality
• quantile regression

JEL Classification:

• C21
• J53
• L83

Acknowledgements

I thank J. Richard Hill for assisting in data collection and providing comments on an earlier draft.

Notes

¹ The URLs for the USA Today website, Doug’s Statistics and Rodney Fort’s database are http://usatoday30.usatoday.com/sports/salaries/index.htm; http://www.dougstats.com and https://sites.google.com/site/rodswebpages/codes, respectively.

² Jewell et al. (2004) analyse the determinants of within-team payroll inequality from 1985 to 2000.

³ The fan cost index is calculated by Team Marketing Report and can be found at Rodney Fort’s database.

⁴ Equation 2 was re-estimated with team-level fixed-effects and again with team-level random-effects. Results are available upon request. The quantitative results are little changed and the qualitative results remain the same.