Heterogeneous Effects of Bonus Pool on Signing Bonus Gap in Major League Baseball Draft

Abstract

The Major League Baseball draft offers a distinctive setting for examining teams’ payment practices. It features team leverage in determining signing bonuses, two primary player groups with differing redraft opportunities, and publicly available rankings that serve as a proxy for players’ abilities and characteristics. Since 2012, the bonus pool system has placed caps on each team's total signing bonuses, while still allowing flexibility in bonus allocations across players. Leveraging these institutional features, this study investigates how the bonus pool has influenced the signing bonus gap between high school players and four-year college players. To capture heterogeneous effects across the bonus distribution, we apply unconditional quantile regression. Our results indicate that the gap has widened significantly only in the lower 0.20-th quantiles, with little change in other quantiles. These findings suggest that teams disproportionately shifted the negative financial impact of the bonus pool onto players with the fewest redraft opportunities, offering insights into team behavior and the draft system design.