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The impact of budget cuts and incentive wages on academic work

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  • Johan Willner
  • Sonja Gronblom

Abstract

Recent university reforms tend to mean budget cuts, economic incentives at all levels and a more powerful management, in the spirit of the new public management. Performance-based pay is often motivated through the principal-agent theory where agents would provide inadequate efforts under a fixed-wage regime. We amend the principal-agent model by introducing intrinsic motivation as one side of a multiple self. It turns out that the fixed regime can lead to higher creative efforts and a higher output per employee under reasonable circumstances. Performance-based pay leads to motivation crowding out if the wage approaches the threshold level for quitting.

Suggested Citation

  • Johan Willner & Sonja Gronblom, 2009. "The impact of budget cuts and incentive wages on academic work," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(6), pages 673-689.
    • Handle: RePEc:taf:irapec:v:23:y:2009:i:6:p:673-689
    DOI: 10.1080/02692170903239853
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    References listed on IDEAS

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    1. Bitzer, Jurgen & Schrettl, Wolfram & Schroder, Philipp J.H., 2007. "Intrinsic motivation in open source software development," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 160-169, March.
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    Cited by:

    1. Johan Willner, 2013. "The welfare impact of a managerial oligopoly with an altruistic firm," Journal of Economics, Springer, vol. 109(2), pages 97-115, June.
    2. Sonja Grönblom & Johan Willner, 2013. "Marketization and alienation in academic activity," Chapters, in: Roger Sugden & Marcela Valania & James R. Wilson (ed.), Leadership and Cooperation in Academia, chapter 7, pages 88-106, Edward Elgar Publishing.

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