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- Title
Motivating Long-term Employment Contracts: Risk Management in Major League Baseball.
- Authors
Maxcy, Joel
- Abstract
This paper presents a theoretical model showing that firms, when facing both market uncertainty and uncertainty about an employee's future productivity, have an incentive to reallocate risk with long-term labor contracts. Long-term employment contracts have typically been modeled as mechanisms whereby workers reduce the risk of lost income with a guaranteed long-term wage that is less than the expected sport wage. Examination of contract length among major league baseball players shows that long-term contracts for marginal players, those for whom it would seem most logical to desire this insurance, are rarely observed. Star players, whose income levels should enable them to purchase this sort of insurance from other sources, represent the majority of long-term contract holders.
- Subjects
SPORTS; LABOR contracts; UNCERTAINTY; BASEBALL; RISK; INCOME
- Publication
Managerial & Decision Economics, 2004, Vol 25, Issue 2, p109
- ISSN
0143-6570
- Publication type
Article
- DOI
10.1002/mde.1112