Latin (Baseball) Economics
A TSE reader, Jeff Baird, steered my attention toward an Economist article on Draft Dodgers No More: Can The Dominican Republic Avoid Puerto Rico’s Fate? MLB included Puerto Ricans in the draft starting in 1990, causing most observers to expect an uptick in PR player signings. Instead, the draft and its age restriction led to a decline of the inflow of PR players:
whereas Puerto Ricans could previously be signed at age 16, a high-school degree (usually given at 18) is required for the draft. Since the island’s schools do not have baseball teams, its 16- and 17-year-olds had nowhere to train. As a result, the number of Puerto Rican MLB signings fell by 13% in 1991-92. Meanwhile, players from the Dominican Republic (DR) and Venezuela remained free agents. Their numbers soared
Baseball is waning in PR — fewer MLB players, cancelling of the winter season, abandoned fields. The article notes additional influences — better alternative opportunities and competition from other sports — but this 1990 shift may well be a substantial contributor.
Now the gunsights are on the DR. As signing bonuses have exploded, MLB and the players union agreed to cap them. In addition, the article notes the likelihood of an international draft to begin in 2014.
Two elements of the PR story really catch my eye. First, the age restriction. Of course, one would suspect that would initiate a nice business in forged birth certificates, a practice not unknown in the development of Latin players. The other aspect is the draft itself. Superficially, this institutional change seems to be more inclusive. Instead, instituting a system that leads to a one-sided choice in a matching problem as opposed to a two-sided choice may be more exclusive. This is what I explored in The NFL Draft: Shotgun Marriages v. Marriages “For Love.”
If the draft is instituted for DR players, it will be an opportunity to test these ideas. Of course, to the DR players (and the country, as the article notes), the issue goes way beyond academics.