A TEST OF EMPLOYER DISCRIMINATION IN THE NBA

Örn B. Bodvarsson and Raymond T. Brastow

Contemporary Economic Policy, 1999, vol. 17, issue 2, 243-255

Abstract: This paper presents a test of an important implication of Becker's theory of employer discrimination: when institutional change enhances labor mobility, employer discrimination falls because it becomes more costly for employers to indulge tastes for discrimination. The test case is the National Basketball Association (NBA). This paper specifically addresses the following question about the NBA: why did black/white player salary differentials vanish by the early 1990s? Previous studies claim that NBA wage gaps in the 1980s are attributable to customer discrimination and monopsonistic wage discrimination. This study argues that employer discrimination was an important source of those gaps and that one reason they vanished was because reduced monopsony power eradicated employer discrimination. Monopsony power fell because the 1988 NBA Collective Bargaining Agreement and the entry of four new teams in the league enhanced player mobility and increased the amount of labor market competition. Using data for the 1985‐86 and 1990‐91 seasons, employer discrimination was proxied by the race of the team's general manager. Empirical results strongly suggest that a major reason the NBA wage gap vanished in the later period was because of a reduction in employers' ability to discriminate. This is in contrast to earlier literature on the NBA, which has tended to emphasize the role of customer discrimination. (JEL J71)

Date: 1999
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