The budget of a university essentially depends on the number of students it enrols. In multi-department universities resources created in one department may be redistributed to other departments. This redistribution affects the way academics share their working time between research and teaching activities. Redistribution creates free-riding on teaching efforts. In this paper, we show that by designing internal financial rules which create yardstick competition for research funds, a multi-department university may induce better teaching quality and research, as compared to the performance of independent departments.
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2004003.
Find related papers by JEL classification: D21 - Microeconomics - - Production and Organizations - - - Firm Behavior D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Investment Policy I20 - Health, Education, and Welfare - - Education - - - General
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