Differing Rates of Return to Performance

Abstract

Recent academic literature has argued that there is no gender discrimination in professional golf and that the gender earnings gap is due to differences in average skill levels. This article examines whether the earnings gap between Professional Golf Association (PGA) and Senior Tour golfers is due to differences in average skill levels or the rates of return to these skills. Data used are from the 1999 professional golf season. OLS estimation, interaction terms, Oaxaca’s decomposition procedure, and gap analysis are employed to investigate this question. The results suggest that the primary source of the earnings gap between PGA and Senior Tour golfers is differences in the rates of return to performance. Although there are plausible explanations for why these differences in coefficients exist, the presence of age discrimination cannot be dismissed.