PLAYING FOR KEEPS: PAY AND PERFORMANCE IN THE NBA |
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Authors: | KEVIN J STIROH |
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Institution: | Stiroh:;Vice President, Federal Reserve Bank of New York, New York, NY 10045. Phone (212) 720-6633, Fax (212) 720-8363, E-mail |
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Abstract: | This paper examines contract-related incentive effects using a unique dataset on individual performance and individual contracts. Evidence from professional basketball players in the 1980s and 1990s shows that individual performance improves significantly in the year before signing a multi-year contract but declines after the contract is signed. One interpretation is that workers strategically increase effort to obtain the most lucrative, multi-year contract but then reduce it once the contract is locked in. This highlights the double-edged nature of long-term contracts: good for employers when workers are fighting for them, but less so when workers have them. ( JEL J22, J3) |
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