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The Upside Potential of Hiring Risky Workers: Evidence from the Baseball Industry

Christopher R. Bollinger¹; Julie L. Hotchkiss^2,3

¹ University of Kentucky · ² Federal Reserve Bank of Atlanta · ³ Georgia State University

Making use of performance data for baseball players, this article provides empirical evidence in support of Lazear’s (1998) theoretical predictions that (1) risky workers will earn a premium for their upside potential, (2) this risk premium will be higher the longer a worker’s work life, and (3) firms must enjoy some comparative advantage in the labor market to be willing to pay a premium to risky workers. The validity of Lazear’s predictions carries implications for wage differentials between young and old workers and between men and women.

DOI

10.1086/377027

Volume

21 (4)

Pages

923-944

Language

en

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