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Would Reducing Tenure Probabilities Increase Faculty Salaries?

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

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5150.

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Date of creation: Jun 1995
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Publication status: published as (Published as "Do Economics Departments with Lower Tenure Probabilities Pay Higher Faculty Salaries?") Review of Economics and Statistics, Vol. 80(November 1998): 503-512.
Handle: RePEc:nbr:nberwo:5150
Note: LS
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  1. McPherson, Michael S. & Winston, Gordon C., 1983. "The economics of academic tenure : A relational perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 4(2-3), pages 163-184.
  2. Levin, Sharon G & Stephan, Paula E, 1991. "Research Productivity over the Life Cycle: Evidence for Academic Scientists," American Economic Review, American Economic Association, vol. 81(1), pages 114-32, March.
  3. Ransom, Michael R, 1993. "Seniority and Monopsony in the Academic Labor Market," American Economic Review, American Economic Association, vol. 83(1), pages 221-33, March.
  4. Daniel S. Hamermesh, 1994. "Aging and Productivity, Rationality and Matching: Evidence from Economists," NBER Working Papers 4906, National Bureau of Economic Research, Inc.
  5. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  6. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 453-72, June.
  7. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  8. Ehrenberg, Ronald G, 1992. "The Flow of New Doctorates," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 830-75, June.
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