Superstar effects, the Black Caps and the Silver Ferns

New Zealand has seen a bit of team sporting success over the last two weeks, with the Black Caps runners-up in the Cricket World Cup, then the Silver Ferns winning the Netball World Cup. However, the two successes were not equally remunerated, and this has created a bit of a media storm today, after it was revealed that the Black Caps will share $3 million in prize money for their second place, while the Silver Ferns receive nothing. On the surface, that seems grossly unfair, and the head of the International Netball Federation was interviewed on Radio New Zealand on that point. However, it isn't clear what the INF could possible do to address the situation.

In my ECONS102 class today, we discussed one reason that explains the discrepancy in prize money between men's cricket and women's netball - 'superstar effects' in labour markets. In the early 1980s, Sherwin Rosen identified that some workers earn much more than their peers do, or more than similar workers did in the past. [*] The reason is that top performers are paid (in part) based on the amount of value that they generate for their employer (e.g. for the national or international sporting body). If a top performer generates a lot of value, they will be paid more. This explains much of the rise in salaries over time for top sportspeople - as television (and more recently internet) viewership has grown, the value generated by a top sportsperson (in terms of the number of viewers they attract) has grown, and their salaries have grown as a result.

Cricket is a sport with a massive global following, albeit concentrated in a small number of former British colonies. The ICC has revenues in excess of US$1.5 billion per year, which is shared among the member countries. In contrast, the International Netball Federation barely breaks even, with revenues of around US$1 million per year (see page 15 of this report). The cricket players clearly generate much more value for the ICC, than the netball players generate for the INF. And they receive compensation that is commensurate with the value they generate.

The comparison across two very different sports, with different levels of spectator and sponsorship support, is clearly problematic and should be avoided. If your goal is to highlight gender differences in remuneration, it would be much better to instead concentrate on the disparities within given sports, such as the difference in prize money between men's and women's FIFA World Cups. Superstar effects can still explain this difference, but at least then you could argue for a redistribution or equalisation of incomes within a single sporting body, rather than arguing that a relatively poor sporting body should be able to match the prize money paid by a much wealthier organisation.

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[*] This was not a new insight, as Alfred Marshall had made a similar point as early as 1875.

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