Pay and Performance: An Examination of Texas High School Football Coaches
Over the past decade, economic investigations of professional sports teams--particularly pay-for-performance studies--have become increasingly prevalent. This emerging research trend has evolved in part because of the broad applicability of economic principles to sporting contexts and also because of the increasing availability of performance and salary data for professional sports participants. Although it has not always been the case, reliable data for selected amateur sports, such as NCAA golf, are also starting to become available, allowing researchers to apply economic reasoning to these varied and important sports environments. (Examples are Callan and Thomas, 2004, 2006, which are investigations of the determinants of success in amateur golf that employed two different samples of NCAA golfers.)
From a theoretical perspective, economic research on sports salaries and performance builds on human capital theory, as first suggested by Becker (1964). Critical to this theory is the belief that education and experience play a significant role in the determination of a worker's performance and earnings. Simply stated, investments in human capital, such as education, training, and work-related experience, are expected to positively influence compensation.
As for the empirical testing of these theoretical models, most salary investigations within the professional sports literature have focused on individual players as opposed to coaches or managers. It is also the case that most used an earnings function model similar to the one developed by Scully (1974), who studied salary determinants for Major League Baseball players. Consistent with Becker's (1964) fundamental hypothesis, Scully's model assumes that a professional baseball player's development of human capital and skill are critical determinants of his earnings. Since Scully's original work, numerous studies have adapted his model to other sports settings. For example, Jones and Walsh (1988) examined salary determination for players in the National Hockey League, and Hamilton (1997) did the same for players in the National Basketball Association.
Despite the accumulating research on players' salaries in various sports, we know of only two papers that adapted Scully's (1974) original model to an examination of the earnings of team managers or coaches. One is a study by Kahn (1993), and the other is an investigation conducted by Humphreys (2000). A brief overview of each follows.
Kahn (1993) used 1987 data for professional baseball teams to estimate an earnings function for team managers, which in turn was used to analyze managerial quality. Following human capital theory, Kahn's model specifies earnings as the natural log of manager salary and includes the following as explanatory variables: years of managerial experience; lifetime winning percentage; and a binary variable to control for league (i.e., American or National). Kahn asserts that there are at least two reasons why experience is expected to have a positive effect on earnings. Specifically, more years of experience should reflect (a) greater skills, developed through on-the-job training, and (b) longevity, based on relatively high-quality management ability exhibited over time. Winning percentage captures team performance or success, which also should positively affect earnings, and the binary league variable controls for any league-specific differences in the demand for managerial quality. As expected, Kahn's results showed that a manager's experience level and career winning percentage have significant and positive effects on salary, although the league variable was not found to be statistically significant.
Humphreys (2000) used Division I NCAA basketball program data for the 1990-1991 academic year to test for possible gender-based differences in compensation among head basketball coaches. …