Returns to Skill in Professional Golf: A Quantile Regression Approach

By Kahane, Leo H. | International Journal of Sport Finance, August 2010 | Go to article overview

Returns to Skill in Professional Golf: A Quantile Regression Approach


Kahane, Leo H., International Journal of Sport Finance


Abstract

There have been a host of empirical papers studying the returns to skill in professional golf (e.g., Alexander & Kern, 2005; Callan & Thomas, 2007; Moy & Liaw, 1998; Rishe, 2001; Shmanske, 1992, 2000, 2008). None of these studies, however, carefully considers the skewed distribution of earnings in professional golf. This paper uses quantile regression to better handle the skewness and outlier values found in PGA earnings data. Using data from the PGA for the years 2004 to 2007 results of quantile regressions show that the returns to skills-such as putting and driving accuracy- have a statistically different impact on earnings at different points on the conditional earnings distribution.

Keywords: golf, PGA, earnings, quantile regression

(ProQuest: ... denotes formula omitted.)

Introduction

The returns to skill in professional sports have been the focus of a growing body of research in sport economics. Scully (1974) was the first paper to attempt to link player skills with compensation in Major League Baseball. Jones and Walsh (1988) studied salaries in the National Hockey League, and Kahn and Sherer (1988) examined salaries in the National Basketball Association. Kahn (1992) studied performance and pay in the National Football League. These papers represent only a small sample of research on salary determination in sports, and the field has made great strides since these early papers were published.

In addition to the above sports, researchers have studied salary determination in professional golf. For example, one of the earliest papers (discussed in greater detail in the next section) is by Shmanske (1992), who used a cross-section of data from 1986 to estimate the relationship between various golf skills and tournament earnings. One of the issues ignored by this paper is the fact that golf earnings are highly positively skewed. Subsequent papers (e.g., Moy & Liaw, 1998; Shmanske, 2000; Nero, 2001) partially address this problem by transforming earnings into natural logs before regressing them on skills. While employing a log transformation may decrease skew, this comes at a price as it ignores some potentially interesting characteristics of the earnings distribution that are captured by its skew. An alternative approach, which is the focus of this paper, is to examine the linkage between professional golfers' earnings and their skills with the use of quantile regression. Quantile regression not only is better equipped to deal with skewed data, but it also allows us to more fully explore the returns to skill by considering non-central points on the conditional earnings distribution.

Previous Research on Golf Earnings

There have been a handful of published papers focusing on the relationship between skills and earnings in professional golf.1 One is the aforementioned paper by Shmanske (1992), who uses a cross-section of the 60 top money winners from the 1986 Professional Golfers Association (PGA) Tour to study how practice improves the marginal product of golfers' skills, which in turn affects their earnings. Based on his empirical findings he notes, among other things, that the value of the marginal product from putting may be in the range of $500 per hour of practice. Later research by Moy and Liaw (1998) uses a cross-section for golfers in the PGA, the Ladies Professional Golf Association (LPGA), and Senior PGA Tour golfers' data for 1993 to estimate the relationship between earnings and various golfing skills. They find that long driving, good putting, and iron play are all important for success in the PGA.2 In comparison, iron play and short game skills are more important for players in the LPGA and the Senior PGA.

On a related topic, Shmanske (2000) considers the earnings differential of players in the PGA and LPGA by examining a cross-section of data for each group from 1998. He notes that while men tend to play for bigger purses in the PGA than do women competing in the LPGA, men also generally play longer courses and more rounds than do women. …

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