FiT Publishing

This study explores reasons for the declining share of revenue going to Major League Baseball players. Though the players’ union and team owners have proposed competing explanations, the phenomenon has not received any rigorous academic study. Economic theories for the similar decline of labor share in the macroeconomy provide possible explanations. The ability to estimate baseball players’ marginal revenue products through their performance offers a unique opportunity to examine the role of worker productivity in determining labor’s share of income in general. The analysis indicates that...Read more

The assumption that workers are paid their marginal product underlies the theory of competitive labor markets and is the basis for comparison with non-competitive markets. Many firms, however, generate revenue in fixed lump-sums that are unrelated to the efforts of current workers. For example, many professional sports receive substantial income from broadcast rights, which are negotiated at wide intervals. We develop a theory of compensation in the presence of “fixed revenue” and test our theory using data from the National Basketball Association. Our results indicate that TV revenue...Read more

We employed a methodology similar to Brown (1993, 1994) to estimate the marginal revenue generated by a top-flight NCAA Division I college hockey player. We added to the extant literature in two ways. First, the previous research focused on college basketball and football players. This is the first attempt to consider the case of college hockey players. Second, previous research has been conducted using relatively small, cross-sections of data. We employed a larger, panel dataset. Empirical results showed that top-flight college hockey players generate between $131,000 and $165,000 in...Read more