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

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

No 663, CEPR Discussion Papers from Centre for Economic Policy Research, Research School of Economics, Australian National University

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. Results from game and season-level regressions also indicate a negative relationship between inequality and performance. We discuss a variety of interpretations of our results.

Keywords: wage dispersion; labor economics; sports economics; baseball; ability; effort (search for similar items in EconPapers)
JEL-codes: D3 J3 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-hrm, nep-lab, nep-lma and nep-spo
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: 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 (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:auu:dpaper:663

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