Labor Markets and National Culture: Salary Determination in Japanese Baseball

Abstract

We analyze the determinants of salaries for players in Nippon Professional Baseball (NPB) using performance data from 2004 to 2006 and compensation data from 2005 to 2007. We find that salaries in NPB are determined by different factors than those that drive salaries in Major League Baseball (MLB). We also find that experience plays a significant role in salary determination, which suggests that the Japanese emphasis on seniority still holds in NPB. Finally, we show that free agency has relatively little impact on salaries in NPB, which suggests that players in NPB are subject to greater monopsony power than players in MLB.