Monday, May 4, 2009

You Can't Buy a Championship... or Can You?

According to the AP:

The recession has hit baseball salaries.

Teams cut payrolls for their active rosters and disabled lists by $47 million from opening day in 2008 to the first day of this season, according to an analysis by The Associated Press. That comes out to a drop of 1.7 percent.

"Clubs were cautious all winter with regards to the economy and were concerned the economy might have an impact on club revenue," said Bob DuPuy, baseball's chief operating officer. "The spending reflected that for many clubs."

Will the caution these executives exercised affect the play of their respective teams?

Looking at the 2008 winning percentages of teams vs. the level of their current payroll, we do see a relationship (albeit limited, as there are always "Devil Ray" exceptions).

And a similar story (though less differential between the "haves" and the "almost haves") appears to be playing out in this relatively young season.

Source: Baseball


  1. That looks like an awful regression line. What are the test statistics on it. I'll bet the beta is not sig diff from zero.

  2. I second Burt's comment. If you remove the one outlier salary, the data cloud is almost spherical.

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