Does the Baseball Labor Market Properly Value Pitchers?

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Defense in baseball is a product of team production in which pitchers and fielders jointly prevent runs. This means that raw run-prevention statistics that economists often use to gauge the value of pitchers, such as earned run average, may not properly assign credit for their performances. Therefore, marginal revenue product derivations based on such statistics contain some erroneous information that may bias the estimates. In this article, the author examines a method for isolating pitcher contributions to the team production of defense. Evidence from the labor market suggests that pitchers are paid according to their individual contributions, consistent with the areas in which pitchers possess skill.