Do Colleges Get What They Pay For? Evidence on Football Coach Pay and Team Performance

Abstract

We use a data set of Football Bowl Subdivision (Division-IA) universities to investigate the hypothesis that higher coach pay leads to improved team performance. Our analysis finds that pay and team performance are positively correlated and that, when schools change coaches, higher pay is associated with improved performance. The evidence suggests that additional rating points are increasingly valuable, perhaps over US$1 million for top teams. Our descriptive analysis reveals the median 2011 head coach pay of US$1.2 million, significant increases over our 2006-2011 study period, and large disparities among schools and conferences. We conclude that administrators perceive highly ranked football teams have significant value.