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The Value of Arbitration Rights in Major League Baseball: Implications for Salaries and Discrimination

Örn B. Bodvarsson and King Banaian
Quarterly Journal of Business and Economics
Vol. 37, No. 1 (Winter, 1998), pp. 65-80
Published by: Creighton University
Stable URL: http://www.jstor.org/stable/40473235
Page Count: 16
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Value of Arbitration Rights in Major League Baseball: Implications for Salaries and Discrimination
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Abstract

In this paper we examine the factors motivating Major League Baseball players to file for salary arbitration, whether arbitration is an effective source of relief from racial discrimination, and whether salaries of filers are significantly different from comparably skilled eligible persons who do not file. We suggest that a player will file if he believes he is underpaid relative to his comparably skilled peers, he believes his team has underestimated his productivity, and because of his race. Furthermore, we hypothesize that the threat of filing generates returns, but filers will earn a premium relative to eligible nonfilers. We test these hypotheses on a sample of 237 players for the 1986-1988 seasons. For both hitters and pitchers the threat of filing and the act of filing generate returns.

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