Entry-Level Productivity and Compensation: A Comparison between the National Hockey League and the National Basketball Association

This paper examines outputs and salaries of entry-level professional athletes in the National Hockey League (NHL) and the National Basketball Association (NBA). Standard economic theory suggests that equilibrium occurs when laborers are paid at a wage equal to their marginal revenue product (MRP). Following processes established by previous sports economics literature, I estimate the relationship between team revenues and winning in order to derive a MRP for individual entry-level athletes. I find that winning does not correlate to team revenues to the degree that previous scholars observed. These findings suggest that measurable player contributions to winning are of relatively low value compared to entry-level contracts. The data also indicate that team revenue is more dependent on team success in the NBA and that its players are paid more closely to their expected levels of productivity. These findings imply a more efficient market and support the institutional structure of the NBA