Salary cap and National Basketball Association teams' productive performance. A two stage Data Envelopment Analysis approach under a metatechnology framework

Nikolaos, Chatzistamoulou and Theodoros, Antonakis and Konstantinos, Kounetas (2020): Salary cap and National Basketball Association teams' productive performance. A two stage Data Envelopment Analysis approach under a metatechnology framework.

Abstract

This paper evaluates NBA team's productive performance using a two-stage approach under a metafrontier framework. The proposed approach decomposes overall efficiency into salary-cap and on-court efficiency while a structure type of heterogeneity arises in the context of East and West conferences. The inclusion of salary cap, an important contributing element, as an input allow us to examine its effect on different types of efficiency. The empirical results show that NBA teams present a diachronically performance in terms of overall, on court and salary cap efficiency. Moreover, technology gaps reduce over time while a beta and sigma convergence examination reveal a path of convergence. Finally, a catch-up index denotes a speed of convergence especially after the salary cap implementation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Salary cap, National basketball association, two-stage production process, Metatechnology production function
• Subjects: C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C44 - Operations Research ; Statistical Decision Theory; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; Z - Other Special Topics > Z0 - General

References

Adcroft, A., Teckman, J., Mondello, M., & Maxcy, J. (2009). The impact of salary dispersion and performance bonuses in NFL organizations. Management Decision.

Anderson, T. R., & Sharp, G. P. (1997). A new measure of baseball batters using DEA. Annals of Operations Research, 73, 141-155.

Barro, R. J., & Sala-i-Martin, X. (1995). Economic Growth. edition.

Barro, R. J. (1991). Economic growth in a cross section of countries. The quarterly journal of economics, 106(2), 407-443.

Barros CP, Garcia-del-Barrio P (2011) Productivity drivers and market dynamics in the Spanish first division football league. Journal of Productivity Analysis 35:5–13.

Assaf, A., Barros, C. P., & Sá-Earp, F. (2009). Brazilian football league technical efficiency: A bootstrap approach. Technical University of Lisbon, WP, 27, 2009.

Bonasia, M., Kounetas, K., & Oreste, N. (2020). Assessment of regional productive performance of European health systems under a metatechnology framework. Economic Modelling, 84, 234-248.

Camarero, M., Castillo, J., Picazo-Tadeo, A. J., & Tamarit, C. (2013). Eco-efficiency and convergence in OECD countries. Environmental and Resource Economics, 55(1), 87-106.

Carree, M., & Klomp, L. (1997). Testing the convergence hypothesis: a comment. Review of Economics and Statistics, 79(4), 683-686.

Chen, K., & Guan, J. (2012). Measuring the efficiency of China's regional innovation systems: application of network data envelopment analysis (DEA). Regional Studies, 46(3), 355-377.

Choi, I., 2001. Unit root tests for panel data. Journal of International Money and Finance, 20(2), 249-272.

Coates, D., & Humphreys, B. R. (2001). The economic consequences of professional sports strikes and lockouts. Southern Economic Journal, 737-747.

Cooper, W. W., Ruiz, J. L., & Sirvent, I. (2009). Selecting non-zero weights to evaluate effectiveness of basketball players with DEA. European journal of operational research, 195(2), 563-574.

Depken II, C. A. (2000). Wage disparity and team productivity: evidence from major league baseball. Economics letters, 67(1), 87-92.

Dietl, H. M., Franck, E., Lang, M., & Rathke, A. (2012). Salary cap regulation in professional team sports. Contemporary economic policy, 30(3), 307-319.

Espitia-Escuer M, García-Cebrián LI (2006) Performance in sports teams. results and potential in the professional soccer league in Spain. Managerial Decision 44:1020–1030.

Färe, R., Grosskopf, S., & Margaritis, D. (2006). Productivity growth and convergence in the European Union. Journal of productivity Analysis, 25(1-2), 111-141.

Haas, D. J. (2003a). Productive efficiency of English football teams—a data envelopment analysis approach. Managerial and Decision Economics, 24(5), 403-410.

Haas, D. J. (2003b). Technical efficiency in the major league soccer. Journal of Sports Economics, 4(3), 203-215.

Hakes, J. K., & Turner, C. (2011). Pay, productivity and aging in Major League Baseball. Journal of Productivity Analysis, 35(1), 61-74.

Hadri, K., 2000. Testing for stationarity in heterogeneous panel data. Journal of Econometrics 3(2), 148-161.

Hofler, R. A., & Payne, J. E. (2006). Efficiency in the National Basketball Association: a stochastic frontier approach with panel data. Managerial and Decision Economics, 27(4), 279-285.

Kao, C., & Hwang, S. N. (2008). Efficiency decomposition in two-stage data envelopment analysis: An application to non-life insurance companies in Taiwan. European journal of operational research, 185(1), 418-429.

Katayama, H., & Nuch, H. (2011). A game-level analysis of salary dispersion and team performance in the National Basketball Association. Applied Economics, 43(10), 1193-1207.

Kourtzidis S.A. 2015. Construction of Two-Stage DEA Models and Economic Applications. Unpublished PhD thesis. Department of Economics, University of Thessaly, Greece.

Kounetas, K., (2014) Greek football clubs’ efficiency before and after Euro 2004 Victory: a bootstrap approach. Central European Journal of Operations Research 22(4), 623–645.

Kounetas, K., & Zervopoulos, P. D. (2019). A cross-country evaluation of environmental performance: Is there a convergence-divergence pattern in technology gaps?. European Journal of Operational Research, 273(3), 1136-1148.

Lee, Y. H., & Berri, D. (2008). A re‐examination of production functions and efficiency estimates for the national basketball association. Scottish Journal of Political Economy, 55(1), 51-66.

Levin, A., Lin, C. F., Chu, C. S. J., 2002. Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics 108(1), 1-24.

Lewis, H. F., Lock, K. A., & Sexton, T. R. (2009). Organizational capability, efficiency, and effectiveness in Major League Baseball: 1901–2002. European Journal of Operational Research, 197(2), 731–740.

Moreno, P., & Lozano, S. (2014). A network DEA assessment of team efficiency in the NBA. Annals of Operations Research, 214(1), 99-124.

Quah, D. (1993). Galton's fallacy and tests of the convergence hypothesis. The Scandinavian Journal of Economics, 427-443.

Quirk, J., and Fort, R. (1992). Pay dirt. The Business of Professional Team Sports, Princeton.

Sala-i-Martin, X. X. (1996). Regional cohesion: evidence and theories of regional growth and convergence. European Economic Review, 40(6), 1325-1352.

Sexton, T. R., & Lewis, H. F. (2003). Two-stage DEA: An application to major league baseball. Journal of Productivity Analysis, 19(2-3), 227-249.

Simar L, & Wilson P.W (2000) A general methodology for bootstrapping in nonparametric frontier models. Journal of Applied Statistics. 27(6), 779-802.

Scully, G. W. (1974). Pay and performance in major league baseball. The American Economic Review, 64(6), 915-930.

Tsekouras, K., Chatzistamoulou, N., Kounetas, K., 2017. Productive performance, technology heterogeneity and hierarchies: Who to compare with whom. International Journal of Production Economics 193, 465-478.

Tsekouras, K., Chatzistamoulou, N., Kounetas, K., Broadstock, D. C., 2016. Spillovers, path dependence and the productive performance of European transportation sectors in the presence of technology heterogeneity. Technological Forecasting and Social Change 102, 261-274.

Vrooman, J. (1995). A general theory of professional sports leagues. Southern Economic journal, 971-990.

Vrooman, J. (2000). The economics of American sports leagues. Scottish Journal of Political Economy, 47(4), 364-398.

Yang, C. H., Lin, H. Y., & Chen, C. P. (2014). Measuring the efficiency of NBA teams: Additive efficiency decomposition in two-stage DEA. Annals of Operations Research, 217(1), 565-589.

Zak, T. A., Huang, C. J., and Siegfried, J. J. (1979). Production efficiency: the case of professional basketball. Journal of Business, 379-392.