Free-agency and the competitiveness of major league baseball

I investigate whether the removal of the reserve clause in professional bas eball affected the competitive nature of the industry in the context of whe ther the distribution of team wins has been affected by free-agency. Unlike previous studies which use the standard deviation of winning percentage, I use a more sensitive measure of parity. I calculate the deviations of the Herfindahl-Hirschman Index of team wins from the competitive ideal during 1 920 to 1996 and relate them to player-talent distribution and structural ch anges in the industry. I isolate the structural effect of free-agency and f ind that it has adversely affected the parity of the American League but th at it has had no statistical influence on the parity of the National League .