INVESTIGATING RACIAL SALARY DISCRIMINATION AND THE ROLE OF BARGAINING POWER: EVIDENCE FROM THE NBA

Abstract

This paper investigates racial salary discrimination by analyzing an NBA dataset from 1985 to 2022. My findings reveal that non-white players receive around 10% lower remuneration than their white counterparts, after accounting for the player, team and consumer attributes. I investigate this salary gap, indicative of discrimination against black players, by studying the salary contracts under which players possess different levels of bargaining power. I find that this earning shortfall is strongly persistent under contracts where employers have monopsony and oligopsony power, suggesting that slight relaxation of the competition in the contracting environment cannot alleviate the discrimination. Nevertheless, discrimination is eliminated when players are signed under contracts that are protected by the collective power of a union. In addition, I discover that a negative demand shock (proxied by COVID-19) and a negative supply shock (proxied by lockouts) amplify this racial discrimination.