Compensation of a manager: the case of major league baseball

In this paper, we are interested in the impact a Major League Baseball (MLB) manager has on a team?s outcome. Using data on manager?s contracts, team performance, and team and manager characteristics, first, we determine the variables that determine a manager's salary. Then, we use a forecasting-type analysis to study the determinants of a manager?s performance, measured by winning percentage, attendance or playoff appearances. We find that a manager's past performance affects his current salary, but his current salary does not affect the team's performance. Our results support the lack of a competitive and efficient market for MLB managers.