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Cliometrica

, Volume 14, Issue 1, pp 105–128 | Cite as

The introduction of the reserve clause in Major League Baseball: evidence of its impact on select player salaries during the 1880s

  • Jennifer K. Ashcraft
  • Craig A. DepkenIIEmail author
Original Paper

Abstract

This paper investigates the impact of baseball’s reserve clause as it evolved from a “gentleman’s agreement” to a formal contract stipulation. Using data describing the salaries of 34 Major League Baseball players during the 1880s, we test whether average salaries, remuneration to marginal product, and the premium paid to a player for changing teams were materially impacted when the reserve clause became binding in 1887. The empirical results suggest that, controlling for player attributes and the overall macroeconomy, average real salaries in the sample fell by 6–9% after the binding reserve clause. We also find that the premium for moving to a new team was reduced by 70% after the binding reserve clause was implemented, supporting Rottenberg’s invariance principle.

Keywords

Sports economics Monopsony Free agency Negotiation 

JEL Classifications

J31 J42 L83 Z22 N31 

Notes

Acknowledgements

Helpful suggestions by seminar participants at West Virginia University, Clemson University, the University of Georgia, Wake Forest University, Greensboro College, and the University of Wisconsin-La Crosse are acknowledged.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Burlington Northern-Santa Fe Railway CompanyFort WorthUSA
  2. 2.Department of Economics, The Belk College of BusinessUNC CharlotteCharlotteUSA

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