Major League Baseball’s reentry draft was instituted under the Basic Agreement of 1976. This contract marked the end of a rough ten-year period of increasing dispute between baseball owners and players, and the beginning of a significant modification in the labor market arrangements that governed the sport. Prior to the 1977 season, the reserve clause left players' mobility, and thus bargaining strength, entirely to the discretion of the team with which they had signed as rookies. Revision of the reserve clause under the 1976 Agreement created a competitive auction market for the services of veteran players. To the public eye, the important consequences of this reentry market have appeared twofold: 1) the escalating player salaries; and 2) player reallocations, possibly to the detriment of competitive balance.
Dolan, Robert C. and Robert M. Schmidt. 1983. "Assessing the Competitive Effects of Major League Baseball’s Reentry Draft." E.C.R.S.B. 83-10. Robins School of Business White Paper Series. University of Richmond, Richmond, Virginia.