REDUCING ASYMMETRIC INFORMATION: EMPIRICAL EVIDENCE FROM MAJOR LEAGUE BASEBALL

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Hamilton, A. (2017). REDUCING ASYMMETRIC INFORMATION: EMPIRICAL EVIDENCE FROM MAJOR LEAGUE BASEBALL. Unc Charlotte Electronic Theses And Dissertations.
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Abstract

This paper estimates the effect wage transparency had on Major League Baseballpitcher’s salaries in the mid to late 1980s. The paper implements a conventionalmethod of wage estimation as previously used in the literature. The data, in partare from a new dataset of players’ salaries, which includes salaries from the pre-1985period. The results show that on average, Major League Baseball pitchers’ salariesincrease by 48.3% over the 1984 level after transparency. However, in 1986 the salariesdecline to 30.3% over the 1984 level, a 18% decline compared to 1985. The paperdiscusses some possible reasons why there was a decline in 1986. One such explanationis that the momentum of upward pressure on wages made the average wage overshootthe equilibrium wage by 18%. Conversely, the period of owner-to-owner collusion isbelieved to have taken place during 1985, 1986, and the 1987 seasons, which likely putdownward pressure on wages during that period. To adjust for collusion, the paperinterpolates damages awarded by the courts in 1990 for collusion and estimates thecollusion adjusted transparency effect to be 51.3%

Details
Author

Hamilton, Austin

Title

REDUCING ASYMMETRIC INFORMATION: EMPIRICAL EVIDENCE FROM MAJOR LEAGUE BASEBALL

Physical Description

1 online resource (48 pages) : PDF

Date

2017

Degree Granting Institution

University of North Carolina at Charlotte

Abstract

This paper estimates the effect wage transparency had on Major League Baseballpitcher’s salaries in the mid to late 1980s. The paper implements a conventionalmethod of wage estimation as previously used in the literature. The data, in partare from a new dataset of players’ salaries, which includes salaries from the pre-1985period. The results show that on average, Major League Baseball pitchers’ salariesincrease by 48.3% over the 1984 level after transparency. However, in 1986 the salariesdecline to 30.3% over the 1984 level, a 18% decline compared to 1985. The paperdiscusses some possible reasons why there was a decline in 1986. One such explanationis that the momentum of upward pressure on wages made the average wage overshootthe equilibrium wage by 18%. Conversely, the period of owner-to-owner collusion isbelieved to have taken place during 1985, 1986, and the 1987 seasons, which likely putdownward pressure on wages during that period. To adjust for collusion, the paperinterpolates damages awarded by the courts in 1990 for collusion and estimates thecollusion adjusted transparency effect to be 51.3%

Genre

masters theses

Subjects--Topics

Economics

Degree

M.S.

Keywords

Baseball Economics
Major League Baseball Collusion
Major League Baseball Salaries
Pitcher Salaries
Reducing Asymmetric Information
Wage Transparency

Subject Area

Economics

Advisor(s)

Depken, Craig

Committee Members

Zillante, Arthur
Amato, Louis

Degree Note

Thesis (M.S.)--University of North Carolina at Charlotte, 2017.

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Rights Holder Information

Copyright is held by the author unless otherwise indicated.

Identifier

Hamilton_uncc_0694N_11456

Permalink

http://hdl.handle.net/20.500.13093/etd:260