Market for Lemons in Academia: Adverse Selection with Dynamic Human Capital Formation and Policy Lock-in

This paper develops a dynamic theory of academic publishing in which evaluation metrics interact with researchers’ skill formation. Building on classic models of adverse selection and signaling, the analysis introduces endogenous human capital dynamics: researchers’ skills evolve as a function of their publication choices. Engagement with high-scrutiny journals enhances skills through learning-by-doing and referee feedback, while repeated publication in low-scrutiny outlets leads to skill depreciation. The model shows that when governing bodies fail to differentiate between high- and low-scrutiny publication outlets—treating all indexed outputs as equivalent—researchers optimally exert minimal effort, triggering a decline in aggregate research skills. Crucially, this process generates hysteresis: even if evaluation policies are later corrected, accumulated skill depreciation may prevent the re-emergence of a separating equilibrium. The theory is empirically motivated by a comparison of two research funding regimes in Kazakhstan—one imposing strict publication targets tied to indexed journals, and another without publication requirements—which generate markedly different publication patterns despite operating within the same academic environment. The framework highlights a previously unexplored channel through which metric-based evaluation systems can cause persistent damage to research capacity. It delivers clear policy implications: delayed reforms are costly, stronger differentiation across publication outlets may be required to restore quality, and increasing the cost of low-scrutiny publication can be as important as raising rewards for high-quality output. While grounded in a specific institutional setting, the model provides a general framework for understanding durable quality failure in research systems reliant on targeted publication metrics.