Up, Out, and Away: Modeling the Personnel Decisions and Labor Structure of Baseball's Minor League System

Abstract

In order to understand potential sources of inefficiency in player personnel decisions in minor league baseball, it is necessary to examine historical trends in this area of the industry. Minor league baseball bears a strong resemblance to an up-or-out labor system, where workers are screened for their ability to perform at the next level following a promotion, and there exist models of the up-or-out system that can be used in this effort to gain a clearer perception of typical career trajectories in the minor leagues. In this paper, I use data from over twenty years of minor league play in an application of an up-or-out model in order to examine player movement patterns within this system and discern potential differences between observed and optimal behavior on the part of both major league organizations and professional baseball players. I show that this model significantly underestimates the exit and promotion rates of players in the minor leagues. I provide various explanations for these differences, in particular as they pertain to the sport’s antitrust exemption and the resulting low wages for players throughout minor league baseball. I then examine several proposed alterations to the existing system, and their potential consequences, in an attempt to better align player performance with predicted exit and promotion rates.