Research Papers

Martin Kleinbard

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Abstract: Talking heads, disgruntled general managers, and bar-goers have argued for years that professional baseball has a major competitive balance problem stemming from payroll inequities. This paper examines, and eventually rejects, that notion, relying on both a cross-sectional and longitudinal empirical analysis. Despite rising payroll inequality, the percent of variation in wins that can be explained by payroll (referred to throughout the paper as the “Win Buying Index”) has been declining relative to historical values and the NFL and NBA. This drop in the Win Buying Index can be attributed to a dramatic rise in the production of young, pre-free agency eligible players with severely suppressed salaries. As the pro-ready age for young athletes continues to fall and leagues continue to enact stricter regulations against substances that had historically disproportionately helped older players, policies that ensure cheap young labor—the league’s most valuable currency—will do more to reduce the effects of payroll on winning than restrictions on overall team salary.