Regime switching and wages in major league baseball under the reserve clause

Michael Haupert () and James Murray ()
Additional contact information
Michael Haupert: Department of Economics, University of Wisconsin—La Crosse, 1725 State St, La Crosse, WI 54601, USA
James Murray: Department of Economics, University of Wisconsin—La Crosse, 1725 State St, La Crosse, WI 54601, USA

Cliometrica, Journal of Historical Economics and Econometric History, 2012, vol. 6, issue 2, 143-162

Abstract: Over the course of the twentieth century, American wages increased by a factor of about 100, while the wages of professional baseball players increased by a factor of 450, but that increase was neither smooth nor consistent. We use a unique and expansive dataset of salaries and performance variables of Major League Baseball pitchers that spans over 400 players and 60 years during the reserve clause era to identify factors that determine salaries and examine how the importance of various factors have changed over time. We employ a Markov regime-switching regression model borrowed from the macroeconomics literature, which allows regression coefficients to switch exogenously between two or more values as time progresses. This method lets us identify changes in wage determination that may have occurred because of a change in the league’s competitiveness, a change in the relative bargaining power between players and teams, or other factors that may be unknown or unobservable. We find that even though Major League Baseball was a tightly controlled monopsony with the reserve clause, there was a significant shift in salary determination that lasted from the Great Depression until after World War II where players’ salaries were more highly linked to their recent performance.

Keywords: Major League Baseball; Salary determination; Markov regime switching (search for similar items in EconPapers)
JEL-codes: C22 C23 J31 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.1007/s11698-011-0067-2 (application/pdf)
Access to full text is restricted to journal subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:afc:cliome:v:6:y:2012:i:2:p:143-162

Access Statistics for this article

Cliometrica, Journal of Historical Economics and Econometric History is currently edited by Claude Diebolt, Dora Costa and Jean-Luc Demeulemeester

More articles in Cliometrica, Journal of Historical Economics and Econometric History from Association Française de Cliométrie (AFC) Contact information at EDIRC.
Bibliographic data for series maintained by ().