Chapter 10 Discrimination: Theory, Measurement, and Consequences FIFTH EDITION The Economics of...

Chapter 10

Discrimination: Theory,

Measurement, and Consequences

FIFTH EDITION

The Economics of Sports

MICHAEL A. LEEDS | PETER VON ALLMEN

Copyright ©2014 Pearson Education, Inc. All rights reserved. 10-2

Introduction

• Jackie Robinson became the first black player in MLB’s modern era (NL; hired by manager Branch Rickie)– 1946—Montreal Royals– 1947—Brooklyn Dodgers

• Larry Doby became the first black in the AL (hired by Bill Veeck)– 1947—Cleveland Indians

• It is remarkable that Robinson and Doby flourished despite the tense atmosphere in which they played


Learning Objectives

• Understand the Becker model of discrimination• Describe how various forms of discrimination can

occur in professional sports• Evaluate gender discrimination in college sports


Empirical Studies and Definitions

• A major study finds that all players face the same opportunities in MLB, NFL and NBA

• Some economic studies find that there are differences in pay in the NBA as well as European soccer

• They also find evidence of discrimination in the NFL draft • We need to distinguish between

– Prejudice -- a feeling or emotion– Discrimination -- an action

• Economists separate two issues– Equal access to work (draft order)– Equal pay for equal work (equal salaries to equally

talented players in same positions)


10.1 Becker’s Theory of Discrimination

• Gary Becker (1957) uses neoclassical theory to analyze and evaluate discrimination like any other “good”– Neoclassical theory assumes that people

maximize utility subject to constraint – Economists focus much more on the outcome of

discrimination than on its origin• Becker considers prejudice a taste

– Discrimination is indulging that taste– This indulgence comes at a cost

• We can reduce discrimination by raising its cost


10.2 Different Forms of Discrimination

• This section introduces– Employer Discrimination– Employee Discrimination– Consumer Discrimination

• Although each model uses money to measure the intensity of the discrimination, they are all based on utility maximization

• As people with a taste for discrimination maximize their utility, their willingness to pay to indulge their tastes has a variety of effects


Employer Discrimination

• In Becker ’s model, employers have preferences regarding employees with whom they do and do not want to associate

• There have been many studies of discrimination against French-speaking hockey players (Francophones)– Their findings depend in many cases on the players’

positions • To simplify matters, assume that there are only two

groups of players– English-speaking (E) and French-speaking (F)

• We assume for now that, although the players’ styles may differ, they are equally productive

– They have the same MPL



• If a hockey team owner dislikes Francophones, employing them brings a psychic cost– He feels that he pays them more than others– The perceived wage is

• wF = (1+dF)wE

– dF = discrimination coefficient (%)• If the employer pays both F and E the same, he

feels as if he is paying F more• As a result, the demand for F falls



• Assume for simplicity that the supply of both players is the same

• Panel b in Figure 10.1 indicates that the wages of both kinds of players will be the same

• Panel a in Figure 10.1 indicates that with discrimination, the demand for Francophones falls– At any given wage, the employers’ distaste for

them reduces their willingness to hire them• As a result, F’s wage falls relative to E’s

– WE > WF


Figure 10.1


Who Wins and Who Loses: Summary

• Francophone players lose– Pay is lower and fewer are employed (Figure10.1)

• Anglophone players win– Pay is higher and more are employed – Less qualified workers are hired

• Unequal pay for equal work results• Prejudiced employers lose

– Francophones’ lower pay offsets psychic cost– Employers pay more for worse players


Statistical Discrimination

• What if productivity differs across the two groups?• Group statistics may indicate nothing about

individual performance• The use of group averages to judge individual

productivity is called statistical discrimination– Employers may use it if obtaining individual

information is costly • Small differences in group statistics can have a

strong impact on a team’s hiring practices and may result in decisions that look like taste discrimination– Statistical discrimination may generate a self-

fulfilling prophesy


Does Anyone Win with Employer Discrimination?

• Consider the case of racial discrimination in MLB• Blacks were effectively barred from organized

baseball from 1888 to 1947 by a “gentlemen’s agreement”

• One group that benefited from discrimination was white players of that era

• More white players played in the major leagues than would have been possible otherwise

• Figure 10.2 reflects the result of assuming that there is a large supply of white players (deep pool of talent) willing to play at market wages—no blacks are hired


Figure 10.2


Segregation Results

• The Negro League owed its existence in part to such discrimination– The league effectively folded once the major

league integrated• Figures 10.3 shows the market for Negro League

• Demand (DS) was much higher before integration (DI)

• Figure 10.4 shows the MLB market• Demand (DI) rose after integration (DS)

• Tastes of consumers changed, both blacks and whites


Figure 10.3


Figure 10.4


Competition Can Eliminate Discrimination

• Unprejudiced employers have an advantage over prejudiced employers– They hire more productive players (and get higher

revenue if consumers and employees are not prejudiced)

– They do not have to pay as much as teams with Anglophones

– They have higher profits• As more unprejudiced employers enter, or as more people

worry about profit than taste– Pay of Francophones is driven up– Pay eventually equals those of Anglophones

• Perfect competition eliminates discrimination


Competition and Discrimination

• In the 1950s, integrated teams were better– Dodgers, Giants, Indians, Braves, and White Sox

were dominant teams• Dodgers and Giants won pennants

– Only the Yankees were good and remained white• Owners had recognized black talent but could not

act on it• MLB kept Bill Veeck from buying the Phillies in 1943

– Veeck had wanted to hire Negro League players– He was the first to integrate AL with 1947

Cleveland Indians


When Markets Are Not Competitive

• In competitive markets, discriminated players work at a discount

• We will now assume that the market for labor is not competitive—it is a monopsony

• The standard model is presented in Figure 10.5• Without discrimination, the employer pays the same

low wage (found on the supply curve) to all players– In this figure, the wage is $800 while the value of

the player is $1000


Figure 10.5


Figure 10.6


Monopsony Model with Discrimination

• Figure 10.6 shows the wages paid to F players• It assumes that

– F players are more productive than E players, so F players are worth $1500 rather than $1000 that E players receive (for example)

– Employers discriminate against F players, which shifts the demand curve from D to D’

• F players are paid more than E players ($960>$800)

• F players are paid less than they are worth because of monopsony power and because of discrimination


Employee Discrimination

• Employees with a taste for discrimination regard the market wage, w, as w(1 - dj)

– dj represents the coefficient of discrimination for employees

– They feel like they are being paid less • In 1880s, a few blacks played in the American Association

– The first was Moses Fleetwood Walker for Toledo in 1884

– Cap Anson, a dominant player for Chicago White Stockings, played in an exhibition game against Toledo team with Moses Fleetwood Walker

– Next year he had a contract not to include black players– White players drove blacks out of MLB by 1888


Employee Discrimination History

• Attempts to reintegrate MLB started after WWII even as employee discrimination was rampant

• The Dodgers traded 5 players for Al Gionfriddo & $100,000, a marginal player, who was willing to take the locker next to Robinson (& “carry the money”)

• In 1947, Dodger players circulated a petition refusing to play with Robinson

• Dodgers manager, Leo Durocher, called a late-night meeting and (in an exquisite speech of which there are different versions) said– See the next slide


Quote

– …I hear that some of you don’t want to play with Robinson. Some of you have drawn a petition. Well, you know what you can do with that petition

– I hear Dixie Walker is going to write Mr. Rickey a letter asking to be traded. Just hand him the letter, Dixie, and you’re gone! I don’t care if a fellow is yellow or black or if he has stripes like a fuckin’ zebra

– I am the manager, and I say he plays. …I’ll play an elephant if he can do the job, and to make room for him I’ll send my own brother home

– He’s going to win pennants for us. He’s going to put money in your pockets and money in mine


Discrimination in Perfect Competition

• Assume the labor market is perfectly competitive– The supply curve is horizontal

• Prejudiced players require a compensation above the market wage: w/(1-dj)

– Such a wage does not exist• Prejudiced players are replaced by those willing to

take the market wage• Alternatively, the employer could ban black players

– Players no longer require a premium wage• Segregation thus results in this case from employee

discrimination


Discrimination v. Segregation

• The two are not the same – though they usually are related

• There could be separate markets for prejudiced and unprejudiced players– Dixie Walker refused to play alongside Robinson – Walker was not refusing to play– He just did not want to play with Robinson

• Dodgers traded Walker to the Pirates in 1948– Teams separate into integrated and non-integrated

teams– Pay and treatment on those teams is not affected

by race


A Digression into Boxing

• Jack Johnson and “unforgivable blackness”– In some ways, he resembled Muhammad Ali– Times did not tolerate a brash black man who taunted his

opponents– Race riots accompanied his title win and defenses (1915)– He spurred the search for a great white hope

• No black man fought for the title between 1915 and 1936• Joe Louis was a supremely talented fighter

– He was groomed with Jack Johnson in mind– His achievement went beyond boxing 2 bouts v. Max Schmeling– He became symbol of American ideals v. Nazism

• Schmeling beat Louis in 193• The rematch in 1938 brought interracial celebration rather

than riots


Consumer Discrimination

• Consumers have a taste for discrimination if they prefer not to purchase goods or services from members of a specific group– Customers feel a psychic cost

• Some fans feel they pay a higher price p(1+dk) when watching black players– p is the price of watching white players

• Consumer discrimination can be difficult to isolate• A team feels pressure to discriminate

– It fears that fans will go elsewhere– Unprejudiced employers are led to discriminate


Consumer Discrimination

• Consumer discrimination can affect attendance• Consumers could show their taste for discrimination

by supporting teams that have fewer players from the group that they dislike

• Consumers could follow teams that are integrated but do so with less intensity—going to fewer games, buying fewer jerseys, watching the team less on television


Detecting Consumer Discrimination

• Studying consumer behavior can be difficult– It is not obvious how to separate taste for the

team from the taste for individual players• Several studies focus on memorabilia rather than

game attendance– Do fans prefer the cards of white players, all else

equal?– Evidence suggests they do


Measuring Discrimination

• In 1988 Kahn & Scherer asked:– Is there racial discrimination in the NBA?– How can there be when the NBA is 80% Black?

• Black players earn more than white ones on average

• The theory of discrimination says that – Average pay is suggestive but not conclusive– Discrimination means paying equals unequally– Compare black players with otherwise identical

whites• Kahn and Scherer found that black players received

about 20% less than white players


Discrimination by National Origin; UEFA

• Civil rights legislation outlaws discrimination on the basis of “race, color, religion, sex, or national origin”

• Union of European Football Associations (UEFA) is the governing body for European Football/Soccer– Collectively, UEFA feared loss of national identity

on club teams if clubs use too many foreigners– Individual teams tried to hire many foreign players

to improve– Until 1991 UEFA allowed each team to have only 2

foreign players– This limitation was struck down by European Union


UFEA

• Because the EU (Treaty of Rome…) allows free movement of labor, teams had to adjust

• 3 + 2 Rule limited each team to three starting players from other countries in 1991– It, too, was struck down—by the “Bosman Ruling”

• Jean-Marc Bosman tried to move from Liege (a team in the Belgian League) to Dunkerque (France); he was blocked and appealed to the European Court of Justice

• UEFA’s current regulation requires “eight players from every 25-man squad to have been developed in the fielding club’s national association”


Positional Discrimination

• Positional (or role) discrimination occurs if players have unequal access to specific positions in team sports

• Players are stacked in specific positions• Consider positions in the NFL in 2010

– 83 percent of quarterbacks are white– 84 percent of wide receivers are black– In general, white players are more likely to be on

offense than on defense• Table 10.1 reports similar inequalities in MLB


Table 10.1


Hockey and Football

• Hockey has changed since the fall of the Wall• Role discrimination is a possible form of statistical

discrimination– A member of a group is being judged based on

the average performance of that group instead of individual talent

– Troubling because if could be “justified” and self-fulfilling

• This could be happening in the NFL– Because there are few black quarterback and

their low incidence could be discouraging others from trying


Discrimination in Coaching

• Minority coaches and managers have become increasingly common– The NFL lags behind MLB and the NBA– See Table 10.2

• Women are represented in all major sports, though they generally have little say in personnel decisions

• Division I college coaching resembles professional ranks– Minorities are underrepresented at Division II and III schools– Fewer women are coaching – even in women’s sports

• Do minority coaches have to be better?– Manning finds that minority NFL coaches have better

records– Kahn finds that minority NBA coaches are no more likely to

be fired


Gender Equity—A Special Case?

• Gender equity is harder to measure• Men & women are seldom in the same venue

– Babe Didrikson Zaharias, Annika Sorenstam, and Michelle Wie entered the PGA—they are exceptions

– Even the same sport may vary: tennis & figure skating

• Mixed competition is rare– Mixed tennis doubles is a contrived event– Horse & auto racing are the only real examples– We do not know if there are few women because

demand or supply is low


Fan Demand for Women’s Sports

• Demand for women’s professional team sports, such as soccer or basketball, is much lower than for men’s sports

• Women fare much better in individual sports– Tennis is a primary example

• Wimbledon TV ratings of women’s tennis is high

– Women are paid more in gymnastics and figure skating

• Women have recently encountered problems in golf– Number of women’s tournaments has fallen


10.3 Title IX & Discrimination in College Sports

• Title IX has been credited with the success of US women in soccer and the Olympics

• Titles deals with more than sports– It is part of 1972 Education Amendments to the

1964 Civil Rights Act– It mandates equal access & opportunities for

women in federally funded education programs• Secondary schools and college


Title IX Compliance

• Compliance has a long history– It is overseen by the Office of Civil Rights in the

Department of Education • There are three ways to comply

– Funding and participation must be proportional to enrollment• 5% gap is allowed

– School must show history of expansion of programs– School must accommodate interests of students

• Very few programs are truly in compliance• No school has been penalized/sanctioned


Title IX Impact

• Some results are desirable. Title IX– Spurred rapid growth in women’s sports

• Most of the growth was in the 1970s and 1980s

– Gave women grounds to seek remediation• Some results are undesirable

– Many colleges have cut men’s programs rather than expand women’s programs

– As rewards to coaching have risen, women coaches have disappeared

• Fell from ~80% of coaches in women’s sports to ~44%

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