Abstract
Although sports teams around the world can no longer use the reserve clause to bind their players forever, teams can still exert considerable monopsony power early in the players' careers. Institutional and cultural factors specific to Nippon Professional Baseball and to Japan suggest that this monopsony power is stronger and longer‐lasting in Japan than in other countries. We use techniques associated with the Oaxaca decomposition to simulate the impact of free agency on the pay of baseball players in Japan who have not yet reached free agency. We find that free agency in Japan has a large impact on pay but that this increase is quite small relative to the impact in Major League Baseball. Copyright © 2016 John Wiley & Sons, Ltd.
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