Relative Salary Efficiency of PGA Tour Golfers: A Dynamic Review

Abstract

Based on one-year sample, Nero (2001) estimated golfers' earnings using four performance measures. We study the effects of the golfers’ abilities and skills on their earnings by estimating a production function for four different years (1995, 2000, 2005 and 2009). Our findings suggest that the effect of each skill and ability changes over time. In this sense, our results show that previous work as Nero (2001) cannot be extrapolated to other years. We also show that a dynamic approach is needed to understand the nature of professional golfers' job performance. Our analysis is complemented by estimation of a stochastic production possibility boundary for each year under study. This allows us to classify PGA golfers according to their relative efficiency. We found that for the 2009 season Phil Mickelson was the most efficient golfer and Brian Bateman the least efficient one. The results also allow us to estimate how much a golfer would have earned given his abilities and skills assuming that he had played as well as the most efficient golfer. Camilo Villegas, for example (the Colombian golfer also known as spider man), earned US$1.8 million in 2009. If he were as efficient as Phil Mickelson was in the 2009 season, he would have earned US$7.8 million: 4.33 times more than what he actually earned.