Thursday, April 1, 2010

Role of debut luck on cricket careers

Mostly Economics draws attention to a working paper by Shekhar Aiyar and Rodney Ramcharan of the IMF which used a dataset of all international test cricketers who debuted between 1950 and 1985 and found strong "evidence that a player’s debut performance is strongly affected by... whether the debut series is played at home or abroad". Further, in keeping with the well-established finding that even controlling for innate ability, a "good first job appears to have a persistent positive impact on long-term career outcomes", they find that "debut performance has a large and persistent impact on long run career outcomes in part because team managements use information inefficiently".

They write,

"We find that playing at home has a large and significant beneficial impact on a cricketer’s performance in his debut test series and that his first-series performance has a major impact on his career productivity. For batsmen, playing at home raises the debut series batting average by an enormous 33%. For bowlers... a home debut lowers the bowling average by about 18% — that is, the bowler allows 18% fewer runs for each batsman he faces."

This in turn highlights the important "role of luck — factors unrelated to ability — in shaping future career outcomes" in the labor market.

How does luck affect a player's career path? The authors employ an instrumental variable (IV) to distinguish between the causal impact of intrinsic ability and luck on a players career performance (batting average). In attempting to estimate the causal effect of some variable x (luck) on another y (player's career performance), an instrument is a third variable z (the location where he made his debut) which affects y only through z's effect on x. The authors write,

"Since we are interested only in the career impact of luck, we employ a two-stage technique, called IVs, to eliminate the influence of ability. In the first stage we study the relationship between players’ debut averages and the location of their debut. Because debut location is a matter of luck, the portion of the debut performance explained by location is then used in the second stage as an explanatory variable for career averages. This two-stage procedure isolates the impact of luck on career outcomes."

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