Racial wage discrimination in major league baseball: do free agency and league size matter?

Does competition suppress racial wage discrimination? Previous research in this area is quite limited and generally inconclusive. This paper tests for the effects of reduced monopsony power on racial wage discrimination against nonwhite Major League pitchers during the 1992 and 1993 seasons. Major League Baseball during this period is a good test case because: (1) older players' salaries are competitively determined, whereas younger players' salaries are not; and (2) more teams entered the league in the later season. We found discrimination in the form of lower incremental rewards to nonwhites for improving performance, as well as reverse discrimination against older white pitchers prior to league expansion. League expansion and free agency eligibility did bring relief from discrimination.