The relationship between intra-team wage disparity and team performance

University essay from Ekonomihögskolan, EHV

Abstract: As far as wage disparity and its social, political and economic consequences are concerned, one can easily see that it is a popular topic on which many studies and research have been conducted. The recent financial turmoil drew the people`s attention on the issue of wage disparity, and the people started to discuss this issue on the equity and fairness grounds, but the only thing that economists can do is to examine the economic consequences of the wide wage disparities. It is much easier to conduct a study on the issue of wage disparity by using the data on the professional sport teams due to their several advantages and in this paper I chose to study the relationship between intra-team wage dispersion and teams` performance by using data on randomly chosen 16 teams from the National Football League over the sample period of 2000-2008. First of all, a general introduction to the issue takes place. Then a detailed theoretical background is provided. After mentioning some previous evidence and methodology, empirical results are revealed. Those results show us that Ramaswamy`s and Rowthorn`s Damage Potential Hypothesis is supported over Levine`s Cohesiveness Hypothesis by the data.

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