WHAT HAVE YOU DONE FOR ME LATELY? A MODEL OF PAST PERFORMANCE ON MAJOR LEAGUE BASEBALL PLAYER COMPENSATION

Tamerlane Asher Prof. Matthew Larsen, Prof. Jeffrey Liebner Economics and Mathematics Department Lafayette College 730 High Street Easton, PA 18042

What role does past performance play in dictating future salaries? Employers reward high-performing employees with better contracts and higher salaries, but how far back do employers look when making these decisions? In Major League Baseball (MLB), free agency is baseball’s equivalent of a labor market where players receive new contracts based on their productivity. In baseball, a variety of statistics, such as home runs, on-plate plus slugging (OPS), strikeout-to- walk ratio (K/BB), and walks plus hits per inning pitched (WHIP), are easily observed and scrutinized when making contract offers. A player accumulates these statistics over time before becoming a free agent and receiving contract offers. Using panel data from Baseball Reference and Cot’s Baseball Contracts, I determine which performance indicators are predictive of salary, and then regress salary in the year of the free agent contract on several prior seasons of performance statistics while controlling for number of games played, injury history, years in MLB, position, team, and league. This identifies both which statistics matter as well as how historical performance is considered when management is putting together a contract. In addition to baseball, these results may more broadly address the estimated effects of prior performance on an employee’s future salary in other industries where salaries are primarily performance-based.


Additional Abstract Information

Presenter: Tamerlane Asher

Institution: Lafayette College

Type: Oral

Subject: Economics

Status: Approved


Time and Location

Session: Oral 8
Date/Time: Fri 2:40pm-3:00pm
Location: Fogelman Classroom Building 131
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