Pay dispersion and team performance in the National Basketball Association

Abstract

This study examines the relationship between player pay dispersion and team performance in the National Basketball Association (NBA) in North America. Specifically, the pay dispersion across teammates in each NBA team was analyzed according to four different models based on their playing time and team performance. Salary data for all NBA teams were collected over 23 consecutive seasons from between 1995-96 to 2017-18. Pay dispersion was measured using the Gini coefficient. Key findings are that the effects of the dispersion are positive for the model with all players in their teams, whereas the effects of pay dispersion on team performance are negative for the models with players who have more playing time, which indicates that greater pay dispersion among the most contributing players is associated with lower team performance. Teams should consider how they can more fairly allocate their capped payrolls among the highest contributing players on their teams based on the equity principle of distributive justice. Teams should consider how they prepare and incorporate other reward methods, such as signing bonuses, which may reduce injustice perceptions of underpaid players and eventually enhance team performance.