Previous Research on Golf Earnings

There have been a handful of published papers focusing on the relationship between skills and earnings in professional golf.1 One is the aforementioned paper by Shmanske (1992), who uses a cross-section of the 60 top money winners from the 1986 Professional Golfers Association (PGA) Tour to study how practice improves the marginal product of golfers’ skills, which in turn affects their earnings. Based on his empirical findings he notes, among other things, that the value of the marginal product from putting may be in the range of $500 per hour of practice. Later research by Moy and Liaw (1998) uses a cross-section for golfers in the PGA, the Ladies Professional Golf Association (LPGA), and Senior PGA Tour golfers’ data for 1993 to estimate the relationship between earnings and various golfing skills. They find that long driving, good putting, and iron play are all important for success in the PGA.2 In comparison, iron play and short game skills are more important for players in the LPGA and the Senior PGA.

On a related topic, Shmanske (2000) considers the earnings differential of players in the PGA and LPGA by examining a cross-section of data for each group from 1998. He notes that while men tend to play for bigger purses in the PGA than do women competing in the LPGA, men also generally play longer courses and more rounds than do women. He finds that, controlling for skill levels, women in the LPGA are not underpaid in comparison to the men in the PGA. A follow-up by Rishe (2001) examines the same issue of earnings differentials, but in this case between PGA and Senior PGA players. He finds that the primary reason for the greater earnings of PGA golfers is that they earn a greater rate of return on their skills than equally skilled golfers in the Senior PGA. He proposes that this difference may be attributable to differing demand conditions (e.g., television viewership, etc.) for golfing skills, but age discrimination may also be a reason.

Work by Alexander and Kern (2005) is aimed at testing the adage of “drive for show, putt for dough.” The adage implies that driving distance is less important in determining the performance (and hence earnings) of professional golfers than is putting and other “short game” skills. The authors employ a panel dataset for PGA players covering the period of 1992-2001 to test this hypothesis, and to see if changes in equipment over the years (e.g., the increased size of drivers, etc.) have affected the importance of driving versus putting. They conclude that there is some limited support that the importance of driving has increased over the years, but that putting remains the most important skill.

Recent research on the linkage between skill and earnings in golf focuses on the fact that skills do not directly determine earnings. For example, Callan and Thomas (2007)-motivated by Scully (2002)-develop a structural model where skills determine score, which in turn determines rank performance, which ultimately determines earnings. Using cross-sectional data from the 2002 PGA Tour they find that their structural equation approach produces somewhat different estimates for the marginal product of various skills in comparison to reduced-from, single-equation studies.

Ref: International Journal of Sport Finance

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