EXTERNALITIES, PROPERTY RIGHTS AND THE ALLOCATION OF RESOURCES IN MAJOR LEAGUE BASEBALL

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Abstract

Most economists who have analyzed professional baseball have concluded that two distinctive features of its labor market—the reserve clause and player draft—influence the distribution of wealth between players and owners but do not affect the allocation of playing talent among teams. Such conclusions, which are strongly at variance with laymen's views of such matters, are derived from theoretical considerations rather than empirical examinations. Our paper examines data from the two decades of major league history and concludes that, on the basis of that data, the empirical generalizations of previous economists do not appear to be justified.

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