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Would Reducing Tenure Probabilities Increase Faculty Salaries?

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  • Ronald G. Ehrenberg
  • Paul J. Pieper
  • Rachel A. Willis

Abstract

The simplest competitive labor market model asserts that if tenure is a desirable job characteristic for professors, they should be willing to pay for it by accepting lower salaries. Conversely, if an institution unilaterally reduces the probability that its assistant professors receive tenure, it will have to pay higher salaries to attract new faculty. Our paper tests this theory using data on salary offers accepted by new assistant professors at economics departments in the United States during the 1974-75 to 1980-81 period, along with data on the proportion of new Ph.Ds hired by each department between 1970 and 1980 that ultimately received tenure in the department or at a comparable or higher quality department. We find evidence that a tradeoff did exist. Equally important, departments that offer low tenure probabilities to assistant professors also paid higher salaries to their tenured faculty. We attribute this to their need to pay higher salaries to attract tenured faculty from the external market.

Suggested Citation

  • Ronald G. Ehrenberg & Paul J. Pieper & Rachel A. Willis, 1995. "Would Reducing Tenure Probabilities Increase Faculty Salaries?," NBER Working Papers 5150, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5150
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    1. Michael Enowbi‐Batuo & Mlambo Kupukile, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 2(1), pages 35-59, April.

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    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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