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Do Scientists Pay to Be Scientists?

  • Scott Stern


    (Department of Management and Strategy, Kellogg Graduate School of Management, Northwestern University, Evanston, Illinois 60208, and National Bureau of Economic Research)

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    This paper explores the relationship between wages and the scientific orientation of R&D organizations. Firms that adopt a science-oriented research approach (i.e., "science") allow their researchers to pursue and publish an individual research agenda. The adoption of science may be associated with a "taste" for science on the part of researchers (a preference effect) and/or as a "ticket of admission" to gain earlier access to scientific discoveries with commercial application (a productivity effect). These two effects differ in their impact on wages. Whereas the preference effect contributes to a negative compensating differential, the productivity effect may result in rent sharing. However, because science may be adopted by firms employing higher-quality researchers, cross-sectional evaluations of wages and science may be biased by unobserved heterogeneity. To overcome this bias, this paper introduces a novel empirical approach. Specifically, prior to accepting a given job, many scientists receive multiple job offers, allowing for the calculation of the wage-science relationship and controlling for differences in salary levels offered to individual researchers. Using a dataset composed of multiple job offers to postdoctoral biologists, the results suggest a negative relationship between wages and science. These findings are robust to restricting the sample to nonacademic job offers, but the findings depend critically on the inclusion of researcher fixed effects. Conditional on perceived ability, scientists do indeed pay to be scientists.

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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 50 (2004)
    Issue (Month): 6 (June)
    Pages: 835-853

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    Handle: RePEc:inm:ormnsc:v:50:y:2004:i:6:p:835-853
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