Player performance, salary and survival analysis in the NBA

Professional sports provide an excellent research environment to study all aspects of the employee-employer relationship. In this study, I use data from the National Basketball Association (NBA) to empirically investigate the impact of contractual arrangements on player performance, salary, and survival. First, I explore changes in player performance in the year at which a contract ends (the contract year). Players improve their performance during the contract year, but no consistent performance decline is observed in the year following the end of the contract year. Second, I focus on salary determination. I demonstrate that player performance is an important driver of their salary. In addition, I explore the interaction between contractual arrangements and salary determination and find that contract length and special clauses, such as player/team options to extend the employment relationship, affect the salary. Third, I explore the determinants of player survival in the league. Good performance, especially offensive win shares, increases player longevity. Changing teams allows young or undrafted players to survive longer in the league. Examining the impact of player options on player survival suggests that player options increase the probability of players changing teams but do not increase the probability of player survival. In summary, my findings indicate that the interaction between contractual arrangements and player performance is important in salary determination and survival in professional sports.