When we control for worker characteristics, we are able to directly test theories of efficiency wages and fairness. We find that high-quality workers continue to be associated with good outcomes. High-wage strategies are also associated with better won-lost performance and higher attendance figures. Conditioning on worker characteristics allows distinguishing wage dispersion that is “efficient” from wage dispersion around predicted wages. In baseball, it appears that the reason for observing the unconditional results of wage dispersion is that the best technology requires workers of similar quality. There is less support for wage “fairness” as an important consideration for firm outcomes.
- efficiency wages
ASJC Scopus subject areas
- Economics, Econometrics and Finance (miscellaneous)