The Impact of Team Revenues on MLB Salaries

We test which individual major league baseball (MLB) player characteristics, such as on-base and slugging percentages, predict a hitter's salary. We also consider whether some MLB teams pay more per individual characteristic than others by using a hierarchical linear model to allow the value that a team places on a player characteristic to vary across teams. We find that offensive statistics are key determinants of player salaries but that teams do not pay differently for them. There are team differences, however, in the salaries received by players who are eligible for arbitration.