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Friday, June 17, 2005

Which year is 2004?

I am still amazed with STATA, which for the uninitiated is a statistical/econometric program. One of the open-source add-on programs is a program that will create Lorenz curves, which for the uninitiated are depictions of disparity.

Here are three Lorenz curves from Major League Baseball. The Lorenz curve shows the concentration in baseball salaries compared to perfect parity, which would be the forty-five degree line coming out of the origin. The more the Lorenz curve is "bowed" towards the right, the more concentrated baseball salaries are, i.e., there are fewer players getting paid a lot more than the majority of players.



The graph above depicts three Lorenz curves, one for 1985, one for 1995 (the year after the strike), and one for 2004. Can you guess which curve depicts which year?

Yellow: 1985
Red: 1995
Green: 2004

Interesting that the players went on strike at the peak of salary disparity.

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