What explains labor’s declining share of revenue in major league baseball?
Department
Economics, Finance and Quantitative Analysis
Document Type
Article
Publication Date
5-1-2021
Abstract
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 the returns to player performance have declined and that collective bargaining agreement terms that promote revenue sharing among teams appear to play a significant role. In addition, increased returns from new non-player revenue sources have lowered the share of league revenue going to players. Competition from substitute labor inputs and changes in returns to physical capital do not appear to be important factors.
Journal Title
International Journal of Sport Finance
Journal ISSN
15586235
Volume
16
Issue
2
First Page
79
Last Page
94
Digital Object Identifier (DOI)
10.32731/IJSF/162.052021.03