Does Greater Intra-Team Salary Equality Predict More Wins and Team Success in MLB?

     There are two competing theories about the relationship between intra-team salary equality and team success. The pay equity theory says that greater salary inequality will lead to worse team performance.  This occurs... [ view full abstract ]

     There are two competing theories about the relationship between intra-team salary equality and team success. The pay equity theory says that greater salary inequality will lead to worse team performance.  This occurs in response to high levels of player resentment and the high degree of risk that comes with placing all chances at success on one or a few players.  In contrast, the tournament theory says that greater salary inequality will lead to better team performance.  The reasoning behind this theory is that the high level of intra-team salary inequality will motivate the lesser paid players to perform better in the hopes of earning a higher future salary.  This study examines this relationship between intra-team salary equality and Major League Baseball (MLB) team success.  Data for all thirty teams in MLB are collected for the years 2001-2016 in order to show the effects that intra-team salary equality has on a team’s winning percentage.  This timeline is free of any past league expansions.  The results show that the pay equity theory holds.  Teams with greater salary equality are more likely to be successful and have higher winning percentages than teams with high levels of salary inequality.