Determinants of Revenue in Sports Leagues: An Empirical Assessment

Empirical studies face severe difficulties when identifying the relationship between wages and labor productivity. This paper presents a novel identification strategy and demonstrates that the connection between wages and labor productivity is remarkably robust even when institutional constraints serve to distort the relationship. Identification is achieved by considering injuries to professional football players as an exogenous shock to labor productivity. This is an ideal empirical setting because injured players in the National Football League cannot be replaced easily because franchises are constrained by the salary cap. Injuries are shown to play a major role in franchise success and a tight connection between wages and marginal productivity emerges. This is in spite of regulatory frictions that serve to hold down wages for some workers. (JEL J24, J31, Z22)

Section: Resultssupporting

confidence: 91%

Section: Resultsmentioning

confidence: 99%

Wages and Labor Productivity: Evidence From Injuries in the National Football League

Gregory‐Smith

2020

“…Finally, the findings above suggest that the results of Bradbury (2019a), while locally relevant, may not exist at a macro level. Specifically, Bradbury finds that individual sport league team's revenues rise at an increasing rate with respect to a team's likelihood of winning.…”

Section: Resultsmentioning

confidence: 84%

The Competitive Returns to the Global Search for Talent: Professional Sports Markets and Foreigners

Schmidt

2020

We examine the geographical and racial diversity of a market's labor supply. While the likely impact of expanding supply is to increase the level of productivity, it is not obvious what impact the expansion would have on the overall level of competition. If the added labor increases productivity differentials or are disproportionately populated on high achieving firms, then the likely result would be greater imbalance. We find that while increases in the foreign-born component are associated with an increase in the overall level of competition, the impact has diminished across time. (JEL C22, D23, D30) * While the author has benefited from insightful comments from two anonymous referees, the usual disclaimer still holds.

“…If the CSF is sufficiently concave, then revenue may increase at an increasing rate with respect to winning, but there is still an optimal investment. This has been explored theoretically (Fort and Winfree 2009) and this result has been found empirically (Bradbury 2019). In this case, the second derivative of the profit function with respect to the team's investment is negative if

ϕ < 1 + \frac{2 ((), x_{i} + α)}{x_{j} + α}

.…”

mentioning

confidence: 90%

If You Don't Like the Outcome, Change the Contest

Winfree

2020

This article analyzes contests when contestants derive heterogeneous benefits from winning and investments are seen as costs to the contest designer. An example of this is sports leagues maximizing league profits. For sports leagues, optimal contests depend upon the heterogeneity of market sizes and the impact of team investment on winning. Sports leagues have mechanisms to change the structure of contests, implying they have some control of the expected payoff of teams, the value of the athletes, and the balance of the league. Data from Major League Baseball and the National Basketball Association are used to empirically estimate the model.