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Richard J. Paulsen

This paper uses game-level Major League Baseball data to identify whether players with greater job security shirk in their preparation between games. Past work has identified evidence of moral hazard arising in multiyear Major League Baseball player contracts, but little work has been done in identifying when shirking takes place. Using a difference-in-differences estimation strategy, this study finds evidence of an inverse relationship between the number of years remaining on player contracts and performance when the player is playing on short rest, when opportunity to rest is scarce, but not on long rest. Using a triple-difference specification, evidence is found that this inverse relationship between years remaining on a player’s contract when playing on short rest occurs for games played in “party cities.” This evidence would suggest that between game preparation is one avenue through which players on multiyear contracts shirk.

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Richard J. Paulsen

This paper uses Major League Baseball data to examine the relationship between years remaining on player contracts and player performance. There is a potential for moral hazard to arise in this principal–agent relationship as the player may choose a less than optimal level of effort from the perspective of team management when the player has many guaranteed years remaining. A player fixed-effects estimation strategy, which finds a significant negative relationship between years remaining and performance, is employed. The primary contribution of this work is to show that this relationship is due to shirking. Alternative explanations for this relationship, such as teams signing improving players to multiyear contracts or players facing an adjustment process when joining a new team, are addressed. Additional evidence which is consistent with shirking behavior shows that shirking occurs on offense, not defense, and for position players, not pitchers.