League policy, invariance, and player mobility and pay: The case of the National Basketball Association

Abstract

The focus of this dissertation is imperfectly competitive sports labor markets and the effects of league labor policy on player mobility, compensation, and job location choice. The analyses conducted herein contributes primarily to a broad area of research within sports economics that generally uses changes in league labor rules to examine employer monopsony power and the validity of the Invariance Principle, which states that the distribution of playing talent in a sports league is invariant to the ownership of the rights to players’ services. After a critical review of the literature and some background on the National Basketball Association (NBA), a broad-to-narrow approach is used to present evidence from three empirical essays. Essay one examines the effects of 40 years’ worth of institutional change on competitive balance in the NBA. Essay two investigates the effects of more recent free agency rules on player mobility and pay. Finally, essay three narrows the focus a bit further to the effects of nonwage job characteristics on player wages and the implications of such nonwage attributes for player movement.