Salary Dispersion and Team Production

Leo H. Kahane

in The Oxford Handbook of Sports Economics

Published in print May 2012 | ISBN: 9780195387780
Published online September 2012 | | DOI:

Series: Oxford Handbooks

Salary Dispersion and Team Production

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  • Economics
  • Industry Studies
  • Labour and Demographic Economics



This article explores the issue of salary dispersion and its effect on productivity. It uses salary and performance data from the National Hockey League (NHL) to distinguish between the theoretical alternatives, thus weighing in on an important issue in labor economics and industrial relations. In addition, it describes the intuition behind the two competing hypotheses. It follows with a discussion of the empirical model and the data used to test the “tournament” versus “fairness” hypotheses. The empirical results are elaborated. The relatively larger payrolls lead to greater team performance. The empirical results clearly and strongly support the “fairness” model when using conditional salary dispersion measures.

Keywords: National Hockey League; salary dispersion; payrolls; labor economics; industrial relations; tournament hypothesis; fairness hypothesis

Article.  7315 words. 

Subjects: Economics ; Industry Studies ; Labour and Demographic Economics

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