In this paper we challenge the presumption that academic tenure is an outmoded institutional form for the small teaching university. Starting from the premise that tenure is granted on the basis of research (reflected in a minimum required number of publications), we argue that tenure has value for a university concerned solely with teaching (as opposed to research) because research enhances human capital and incentives for its accumulation are necessary to improve the quality of faculty teaching over the lifecycle. However, while human capital accumulation and research effort create future value, contracting on either basis is not feasible because neither can be measured objectively. Numbers of publications, the usual proxy for research, meter the desired activity only imperfectly due to randomness in the publication process. In these circumstances, an employment contract that offers tenure, compared with contracts that a) reward only teaching and b) supplement teaching payments with a direct reward for publications, can better generate the optimal level of human capital. The minimum publication requirement of the tenure contract induces the optimal level of research with less variation in expected income, avoiding inefficient behavioural responses to the greater riskiness of a contract rewarding only realised publications. Copyright 1999 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia
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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number
95-12.
Length: 25 pages Date of creation: 1995 Date of revision: Publication status: Published: "A Theory of Tenue for the Teaching University", Australian Economic Papers, Vol. 38, No. 1, March 1999, pp. 9-25 Handle: RePEc:car:carecp:95-12
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Find related papers by JEL classification: D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Carolyn Pitchik & Aloysius Siow, 1997.
"Self-Promoting Investments,"
Working Papers
pitchik-97-01, University of Toronto, Department of Economics.
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