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Edited by Sten Söderman and Harald Dolles
Chapter 21: Panel econometrics in sports economics research: player remuneration and sporting performance
More than ten years ago, labor economist Lawrence Kahn (2000: 75) emphasized that: professional sport offers a unique opportunity for labor market research. There is no other research setting than sports where we know the name, face, and life history of every production worker and supervisor in the industry. Total compensation packages and performance statistics for each individual are widely available, and we have a complete data set of worker-employer matches over the career of each production worker and supervisor in the industry. . . . Moreover, professional sports leagues have experienced major changes in labor market rules and structure . . . creating interesting natural experiments that offer opportunities for analysis. Since then, the number of publications in ‘mainstream’ economics journals has increased rapidly. Moreover, the Journal of Sports Economics and the International Journal of Sports Finance have attracted the attention of a wide (academic) audience. Today, many researchers with a solid background in industrial organization, labor and personnel economics as well as econometrics use data from the professional (team) sports industries in the United States (US ) and in (Western) Europe applying ‘state-of-the art’ techniques to study various issues: what are the main determinants of player remuneration and of contract length? What are the determinants of player mobility and career length? To what extent do individuals respond to (changes in) incentives? What is the relationship between team wage bills and (sporting) performance? Does the distribution of salaries affect team performance? To what extent are ‘fairness considerations’ important? What is the impact of organizational ‘constraints’ such as draft rules, roster restrictions and salary caps on the behavior of (win maximizing versus profit maximizing) clubs? Do the clubs use the available resources (for example playing and coaching talent) efficiently?
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