Date of Graduation

5-2016

Document Type

Thesis

Degree Name

Bachelor of Science in Business Administration

Degree Level

Undergraduate

Department

Economics

Advisor

Dongya Koh

Reader

Andy Brownback

Abstract

Sports leagues provide an interesting window to view issues that larger economies face that are much harder to measure due to their complexity. These leagues have many policy tools similar to those used in major world economies such as minimum wage, price ceilings, labor unions, and revenue sharing, although the impact of these policies are much easier to measure in the closed economy model of a sports league because the income and output of every player in a given year is known. In this paper, I measure the level and trend of income inequality in the NBA, NFL, and MLB, by deriving the Lorenz Curve of income inequality for each league and calculating a GINI index for each league. From here, I will compare the structural differences and similarities in the salary cap and revenue sharing models of each league to determine the impact of these policies on income parity. The results reveal that MLB is the most unequal of the leagues as measured by GINI index, variance of league salaries, and average variance of team salaries as a result of a soft salary cap and weak revenue sharing model. When measuring the GINI index by the total amount of money contributed to the salary cap each year, the NBA is slightly more equally distributed than the NFL, however this difference disappears when simply measuring GINI by a player’s base salary due to the excessive use of bonuses in player contracts in the NFL.

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