The Impact of MLB Player Injuries on Team Performance and Player Valuation

This paper examines the effect that player injuries have had on team performance in MLB and how teams have evaluated injuries in response. After reviewing previous literature on MLB production functions and relevant economic theory on professional sports leagues and stochastic production, this paper uses basic econometric tests to add injuries into accepted models of team performance and player compensation. The tests find that days lost to injury are significant when regressed alongside player salaries and player statistics. Additionally, the tests find that for every day lost a hitter can expect about an $18,000 decrease in median contract amount offered and a pitcher can expect about a $21,000 decrease in amount offered. After calculating the marginal revenue product of injuries, the models indicate that teams have discounted players with injury histories more than injuries have hurt their revenues. Final tests indicate that certain teams have attempted to exploit this inefficiency but many have not