U.S. Labor Market Regulation and the Export of Employment : Major League Baseball Replaces U.S. Players with Foreigners

Our analysis of the market for professional baseball players shows that domestic labor-market restrictions have reduced domestic employment, especially of African-Americans, with employers instead shifting employment overseas. Our theoretical model suggests that, in 1965, the imposition of both the player draft and stricter age minimums for hiring U.S. players reduced the benefits of signing and developing U.S. players, especially players from disadvantaged groups such as African-Americans. Our empirical analysis, using a new data set, then shows that, in response, teams have shifted to developing and hiring players from other countries where the regulations do not apply, such as Latin America