Salary Inequality, Team Success and the Superstar Effect

Philippe Cyrenne

Departmental Working Papers from The University of Winnipeg, Department of Economics

Abstract: In this paper, I examine the relationship between a professional sports team's salary distribution and its performance. I first develop a simple model of a team's salary distribution and then using data from the period covered by the recent Collective Bargaining Agreement between players and owners in the National Hockey League, I examine the relationship between a team's salary distribution and its winning percentage. Using a variety of estimators and a variety of measures to describe the distribution of player salaries on a team, I find that teams with higher relative payrolls and lower salary inequality have higher winning percentages. I also find evidence of a superstar effect, in that teams with a higher maximum player salary have higher winning percentages. The results are sensitive; however, to the particular measure of salary inequality used and the endogeneity of the salary distribution.

Pages: 25 pages
Date: 2014-09
New Economics Papers: this item is included in nep-hrm and nep-spo
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Citations: View citations in EconPapers (1)

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