Abstract
ABSTRACT Using salary data for players in the National Football League, I examine empirically the relationship between salary inequality and team performance under dynamic panel regressions. Main findings are: 1) the relationship between salary inequality and team performance is robustly hump-shaped, 2) the optimal Gini index to maximize the number of wins in a regular season is approximately 0.71 from estimates with all players’ salary data and ranges between 0.52 and 0.56 with players on rosters. These results imply that neither perfect equality nor perfect inequality in salary distribution is beneficial to team performance.
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