The chapter first provides a basic overview of the broad field of personnel economics, examining some of its key research questions and approaches. It then discusses how this broader field can be applied specifically to professional sport, particularly focusing on the peculiar institutional mechanisms in sport that potentially impact this application.
The promise of the reverse-order draft is that bad teams can acquire talented players to dramatically improve their fortunes. But academic research on the NFL and NBA indicates that this promise is often not realized. For example, research has shown that NFL teams generally overvalue high picks in the draft. In addition, research specifically on quarterbacks shows that the pick number at which they are selected in the draft does not seem to be statistically related to their future NFL performance. Problems also exist in the NBA draft. Younger scorers who play for winners in college tend to be drafted first. However, there is no evidence that age, scoring, or college team success is related to NBA productivity. Hence – with respect to the NFL and NBA – the promise of the draft fails for many of the league’s losers.
Joachim Prinz and Daniel Weimar
The youth training academy system in German soccer is examined. The chapter argues that the academy system acts not only as a long-term screening function (i.e. a long-term probation), but also has a training and development purpose whereby teams impart both general soccer-related skills to youth as well as club-specific skills, knowledge, and attitudes. From a recruiting perspective, the training academies allow clubs to gain private information about players, helping clubs to ultimately determine the quality of the club-player match. The chapter also identifies several impediments to effectively identifying the best youth players, including the continued long-term persistence of the so-called ‘relative age effect’.
An overview of the literature studying player performance and salaries is provided. The chapter argues that the ‘traditional’ approaches tended to view the drivers of players’ salaries as falling into one of four broad categories – experience, performance, talent, and popularity. It notes that using just these traditional drivers is deficient in that, collectively, they usually fail to explain 30 to 40 percent of the variation in salaries. It then discusses new advances in the literature that attempt to better incorporate into salary models factors like non-cognitive skills and work habits, and explains how researchers are now examining such player-characteristics as leadership skills, performance under pressure, and performance volatility to determine which, if any, of these factors may impact salary.
The chapter examines issues related to contract-length in sport. It focuses on the observed phenomena in baseball where players on long-term contracts also receive a salary premium – a result that is counter to the standard hypothesis that workers on long-term contracts transfer their performance risk to clubs, and hence should be willing to accept a salary penalty for such transference. It discusses a possible reason for this empirical finding – high-skilled free agents are difficult to replace, and teams may be willing to enter long-term contracts to protect against future increases in the market price for these players’ services. The chapter’s empirical results find that both player performance and free agent-eligibility (as opposed to players that are only arbitration-eligible) independently increase the probability of a player receiving a long term contract.
The chapter examines the economics of workplace interactions, focusing on the building of effective work teams, and the particular role of coworker heterogeneity. It reviews some of the key literature pertaining to the impact on team performance of factors such as (i) productivity spillovers across teammates, (ii) heterogeneous abilities amongst teammates, and (iii) cultural diversity within a team.
Two competing theories related to pay dispersion – the tournament model versus the fairness model – are contrasted. The empirical work examines pay dispersion in the National Hockey League in the three seasons just prior to, and the three seasons just after, the 2004–2005 season-long work stoppage which ultimately resulted in a collective bargaining agreement that drastically compressed salaries in the league. The results lend strong support for the fairness model, meaning that lower within-team pay disparities results in, all else equal, higher team performance
The chapter examines the impacts of coaches on team performance. It focuses on soccer, and analyzes the impact of head coach dismissals on the subsequent performance of the team. It examines the methodological difficulties in studying such a question, and highlights some of the important research in the area. It notes that, while the specific results vary widely across papers, there seems to be no strongly consistent evidence that coaching changes fundamentally improve team performance.