Is There Salary Discrimination by Nationality in the NBA?

Abstract

The authority of the National Basketball Association (NBA) over the past decade has actively internationalized the game by recruiting potential international players and expanding overseas markets. This article examines the determinants of salaries for NBA players, aiming to identify the existence of nationality discrimination on players’ salary and whether the market size of international players’ home countries matters to their compensation. Based on an unbalanced panel data of 618 NBA players between the 1999-2000 and 2007-2008 seasons and employing the technique of two-stage double fixed-effect model, the empirical results suggest that international players seem to receive a lower salary than that of their U.S.-born counterparts, ceteris paribus, suggesting the existence of salary discrimination by nationality. However, international players who come from a large economy receive preferential labor market treatment, highlighting the importance of the home country market to their salaries. The player characteristics such as positions, height, draft, and a team’s local market size indeed play crucial roles in determining players’ salaries. The authors also find that U.S.-born White players tend to be paid less than U.S.-born Black players. It may reflect the fact that more WHITEs tend to be Bench players or the possibility of racial discrimination.