The persistent effects of early career contracts: evidence from NBA drafts

Qiyao Zhou, Debao Hu and Keren Shi

Applied Economics, 2023, vol. 55, issue 58, 6876-6891

Abstract: This article examines the persistent effects of early career contracts using the National Basketball Association (NBA)’s draft data over the period 1995–2019. We use regression discontinuity design (RDD) to compare the differences in career outcomes between the first-round picked rookies and the second-round picked ones. The empirical results suggest that draft rounds per se significantly influence a player’s career outcome in almost all indicators (i.e. career earnings, total points scored, and total years played). Explorations of the mechanisms suggest that differences in rookie contract length and sunk costs influence teams’ human capital investment in rookies.

Date: 2023
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DOI: 10.1080/00036846.2023.2166662

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