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Labor Markets in Professional Sports

Author

Listed:
  • Sherwin Rosen
  • Allen Sanderson
Abstract
Many interesting elements of supply and demand are starkly observable in professional athletics. Understanding institutional arrangements, competitive balance and labor-management relations requires a basic understanding of sports labor markets and the struggle for control of those markets between interest groups. In this paper we treat historical and contemporary labor issues in North America and Europe, from reserve rules and free agency, high levels of player pay and work stoppages, to the distribution of playing talents across teams. We discuss the relationship between personal productivity and pay; relative versus absolute demand; competitive and cooperative interactions across firms (teams); factor substitutions; player mobility and the Coase theorem. We briefly consider how property rights affect supply, athletic talent, arms races and restrictions on competition. The problem of (excess) incentives to compete leading to externalities and inefficiencies are noted throughout the paper. Restrictive agreements such as reverse-order drafts, payroll caps and revenue sharing may constrain these forces, but they also redistribute rents from players to owners. All of these schemes, in one way or another, punish success. The European approach -- promotion of better-performing teams and relegation of those with the poorest records -- punishes failure. It remains an interesting economic question as to which system is better.

Suggested Citation

  • Sherwin Rosen & Allen Sanderson, 2000. "Labor Markets in Professional Sports," NBER Working Papers 7573, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7573
    Note: LS
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    References listed on IDEAS

    as
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    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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