Vertical Integration and Competitive Balance in Professional Sports: Evidence From Minor League Baseball

Major League Baseball (MLB) teams regularly call up players from their Minor League Baseball (MiLB) affiliates to fulfill roster needs. This paper utilizes a manually collected panel of player call-ups between 1946 and 2019 and studies their impact on competitive balance in the minor leagues. Our results indicate an overall positive relationship between call-ups and competitive balance in MiLB, with the pro-competitive effect primarily driven by AA leagues and not AAA leagues. We also find suggestive evidence that the effect is likely explained by the promotion of MiLB players to MLB rather than the demotion of MLB players to MiLB. Our findings provide important policy implications regarding vertical relationships and human capital development in professional sports.