Judicial Compensation and Performance

Judges have considerable influence over legal proceedings and outcomes. Intrinsic motivations are an important component of the explanation of why individuals seek out the bench. It has been argued, though, that judges maximize the same things that everybody else does, including income. In this research we utilize a unique data set from New York State on appealed felony convictions to identify the impact of judicial salary on performance. We exploit a large increase in judicial salaries, which followed a 12-year period of unchanged salaries, to identify the impact. We differentiate two alternative explanations for salary’s effect on outcomes. Increased salaries can act as efficiency wages to induce currently sitting judges to work harder to continue their employment. Also, higher salaries can affect occupational choice, encouraging high-quality attorneys to instead seek the bench. In both instances, we anticipate an increase in the number of cases that are upheld upon appeal. By examining judges who served both before the wage increase and after, we can test for the presence of selection and effort separately. First, we document that the rate at which appealed convictions were reversed or modified decreased by 4.2% after the salary change went into affect. Second, although we do record a slight selection effect, we find that this change comes primarily from the higher salary encouraging higher quality decision making. Specifically, judges on the bench before the wage increase were significantly more likely to have their appealed cases upheld after the salary increase went into effect than before. Thus, efficiency wages are an important driver of the legal system’s quality.