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Finding a Good Economics Paper Topic Here are some topic ideas that you can use for your economics research paper: Should marijuana be legalized?
Consider the benefits of both medical and recreational uses. Analyse costs and benefits of gun registry Why are baseball stadiums often a poor investment by the government? Talk about violence in hockey from a social viewpoint. How could it be reduced, and does it even need to be? How do tariffs affect the economy? Why are only online activities being criticized while real, physical casinos are growing and spreading successfully? How should universities reconsider their policies about academic misconduct regarding students?
If pay inequality creates tensions or animosity among team members, performance is likely to suffer. On the other hand, inequality could have a positive effect on performance by providing incentives. Pay inequality might also enhance performance if low paid players learn from high paid players. This would happen when pay inequality is associated with skill inequality. For example, if a highly paid superstar can teach other players, the overall performance of a team may improve.
Given that arguments can be made both ways, it is not surprising that there is little agreement on the effects of pay inequality on team performance. The purpose of this paper is to determine whether, on balance, the effect of pay inequality on performance is positive or negative. First, team managers can use this information to make decisions about which players to hire. For example, should they hire one expensive superstar and two inexpensive players, or three medium-priced players?
If we find that pay inequality leads to poor team performance, then the team may perform better with three medium-priced players than one superstar and two low-priced players. Second, because salaries are a large part of contract negotiations between player associations and team owners, understanding the effects of pay inequality on performance can help determine optimal policies.
For example, if pay inequality has a negative effect on performance, an argument for a higher minimum salary could be made. There are a number of studies that look at the effects of pay inequality on performance. They find that pay inequality is associated with poor performance. Frick, Prinze and Winklemann look at the effects of pay inequality in all four major leagues in North America. They find that inequality improves team performance in basketball and worsens team performance in baseball.
They find no statistically significant effect of inequality on performance in football and hockey. This paper looks at the effects of inequality on performance in MLB. It differs from that of DeBrock, Hendricks and Koenker in that it uses the most recent data.
While the previous authors use data from through , I use data from the latest two seasons: Another difference is that I use a different measure of pay inequality. Data The data on pay inequality was constructed in the following way. I summed the salaries of all players for each team and each season to obtain the total payroll. The active roster in baseball is 25, but the database includes salaries of disabled players as well.
Therefore, the number of players for each team ranges from 25 to For example, for a 30 player team I summed the salaries of the highest paid 6 players and divide that amount by total payroll.
To measure performance I use the percentage of games won in the regular season. This data comes from BaseballReference. It does not include performance during league championships or the World Series. However, with games per regular season, the winning percentage can be regarded as a reasonable measure of performance. This is also the measure used by DeBrock, Hendricks and Koenker In addition to pay inequality and performance, I use data on the total payroll of each team.
This is a measure of financial resources which could be an important determinant of performance. I measure payroll in current dollars and do not adjust for inflation. While dollars are not exactly comparable to dollars, inflation was low enough not to influence the results significantly. Table 1 shows the descriptive statistics of each variable.
This implies that on a 30 player team, the six best paid players earn more than the remaining 24 combined. The team with the highest inequality was the Colorado Rockies during the season. The maximum winning percentage in the data is for the St. Finally, the last row in Table 1 shows that the average payroll is about 70 million dollars. The range of payroll is quite striking.
Empirical Results I estimate three different specifications. The dependent variable in each specification is performance, as measured by the percentage of games won. Pay inequality and total payroll are the independent variables. Table 2 shows the results. This indicates that teams with higher pay inequality tend to win fewer games. Number of observations is Standard errors are in parentheses. In the second specification I include total payroll as an independent variable.
Payroll is a measure of the financial resources which can affect performance - the higher the payroll, the higher the quality of players and, generally, the better the performance. Therefore, including payroll may increase the precision of the estimated coefficient on pay inequality. More importantly, it is possible that pay inequality is correlated with total payroll.
If low payroll teams tend to have more pay inequality, then the coefficient on pay inequality in specification 1 is biased. Teams with high pay inequality may perform worse not because of pay inequality, but because they are also the teams with a lower payroll. Therefore, in order to measure the effect of pay inequality on performance, I need to control for total payroll. The impact of inequality on performance does not seem enormous.
For example, a five percentage point increase in inequality for the team with median inequality would shift the team up 13 spots in the inequality ranking, but its performance ranking would drop by only 2 spots. The coefficient on total payroll is positive and statistically significant. A one million dollar increase in total payroll is associated with about 0. This indicates that greater financial resources tend to improve performance.
Adding payroll as an independent variable led to an increase in R-squared from about 0. Finally, in specification 3 I include the logarithm of payroll instead of payroll.
I want to verify that the result in specification 2 is robust to different functional forms. In addition, the effect of an additional one million dollars may be smaller for a team with a million payroll than for one with a 20 million payroll.
Thus, including payroll in logarithm seems appropriate. The log of payroll is statistically significant. A one percent increase in payroll is associated with about 0. Conclusion The analysis in this paper shows that pay inequality within MLB teams has a negative effect on performance. The effect remains statistically significant even after controlling for total payroll. The result is the same as that of DeBrock et al. My paper confirms their finding using the most recent data and using a different measure of pay inequality.
The fact that pay inequality leads to worse performance implies that managers should strive for pay equality in their teams. For example, instead of hiring two low-priced players and one superstar, performance may be better if three medium-priced players are hired.
Given these results, it is surprising that there is not a more equal distribution of pay in baseball. One possible explanation is that managers may care about attendance as well as winning. They may be willing to sign up an expensive superstar who will attract fans even though it will increase pay inequality and may hinder performance.
The conclusions above are subject to a number of limitations. First, it is unclear to what extent the results can be generalized to other sports. Each sport requires a different degree of cooperation among team members. Therefore, the relationship between pay inequality and performance is likely to differ across sports. Second, the error terms for each team could be correlated over time. For example, if a team wins a lot of games one year given its payroll and pay inequality, that team is likely to win a lot of games the next year as well.
Therefore, the estimation procedure may need to correct for this autocorrelation. Finally, there may be other variables that affect performance, e. Including these in the regression would increase the precision of my estimates as well as eliminate potential omitted variable bias. The channels through which pay inequality affects performance are not clear. I can think of two possibilities. One is that pay inequality leads to tensions within the team and impairs performance.
The other possibility is that baseball requires players of similar quality. Pay inequality is probably associated with skill inequality, and it may be the skill inequality that drives down performance.
An excellent pitcher cannot win the game when the outfielders cannot catch or throw.
Encompassing the traditional economics research paper topics as well as those that economists have only more recently addressed, this list will meet the needs of several types of readers. Students of economics will find summaries of theory and models in key areas of micro- and macroeconomics.
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