Financial Effect of Performance Enhancing Drug Use by Major League Baseball Players During the “Steroid Era”

Abstract

This study uses a variety of economic methods to address the financial impact of steroid use by Major League Baseball players during the so-called “steroid era” from 1990-2005, specifically the extent that steroid use had on player salaries and team revenues. This study improves upon past studies by analyzing changes in finances over multiple time periods, including before, during and after the steroid era. I use select offensive performance variables as proxy variables for steroid use. My first analysis uses OLS regressions under the assumption that I do not know exactly which players used steroids. My second analysis uses a dummy variable to identify likely steroid users and non-steroid users from four different lists I created from publicly available data of others’ designations. The first list includes players who were named in the Mitchell Report. The second list includes players who tested positive for performance-enhancing drugs since implemented by MLB in 2005. The third list includes players who have admitted to steroid use. The final list includes players who have been implicated for steroid use by substantial media reports and other forms of evidence. My results show that the use of steroids by players had a more direct impact on player salaries than it did on team revenues, and that the overall financial effect of steroid use is smaller than past studies have concluded.