Labor Markets and National Culture: Salary Determination in Japanese Baseball

Abstract

We analyze the determinants of salaries for players in Nippon Professional Baseball (NPB) using performance data from 2004 to 2006 and compensation data from 2005 to 2007. We find that salaries in NPB are determined by different factors than those that drive salaries in Major League Baseball (MLB). We also find that experience plays a significant role in salary determination, which suggests that the Japanese emphasis on seniority still holds in NPB. Finally, we show that free agency has relatively little impact on salaries in NPB, which suggests that players in NPB are subject to greater monopsony power than players in MLB.

Monopsony Power in the Labor Market of Nippon Professional Baseball

“…Fitts () provides anecdotal evidence that this system also exists in the subservient status of young players in NPB . Consistent with Leeds et al (), we find that salaries increase with pay well into a player's career (14.7 years). This impact is far stronger and lasts far longer than studies have found for North American sports.…”

“…Pay frequently rises with experience well beyond the point at which pay increases are justified by increases in productivity. (See Leeds et al , . )…”