Wage dispersion and team performance: a theoretical model and evidence from baseball

Robert Breunig, Bronwyn Garrett-Rumba, Mathieu Jardin and Yvon Rocaboy

Applied Economics, 2014, vol. 46, issue 3, 271-281

Abstract: We develop a general theoretical model of the effect of wage dispersion on team performance which nests two possibilities: wage inequality may have either negative or positive effects on team performance. A parameter which captures the marginal cost of effort, which we estimate using game-level data from Major League Baseball, determines whether wage dispersion and team performance are negatively or positively related. We find low marginal cost of effort; consequently, wage disparity is negatively related to team performance. Game and season-level regressions also indicate a negative relationship between inequality and performance. We discuss a variety of interpretations of our results.

Date: 2014
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Working Paper: Wage dispersion and team performance: a theoretical model and evidence from baseball (2014)
Working Paper: Wage dispersion and team performance: a theoretical model and evidence from baseball (2012)
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DOI: 10.1080/00036846.2013.839864

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