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date: 09 May 2021

Abstract and Keywords

This article explores the issue of salary dispersion and its effect on productivity. It uses salary and performance data from the National Hockey League (NHL) to distinguish between the theoretical alternatives, thus weighing in on an important issue in labor economics and industrial relations. In addition, it describes the intuition behind the two competing hypotheses. It follows with a discussion of the empirical model and the data used to test the “tournament” versus “fairness” hypotheses. The empirical results are elaborated. The relatively larger payrolls lead to greater team performance. The empirical results clearly and strongly support the “fairness” model when using conditional salary dispersion measures.

Keywords: National Hockey League, salary dispersion, payrolls, labor economics, industrial relations, tournament hypothesis, fairness hypothesis

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