Why Referees Don't Get Paid (Enough)

Abstract

This paper examines why referees for academic journals and grant applications are often not paid for their work. We postulate that referees are motivated by a non-monetary concern for journal quality and also by monetary considerations. Increasing pay is, therefore, a means of encouraging marginal referees to opt to review articles rather than rely on others to do the task at a later stage. However, journal quality is influenced by the speed of reviewing. Thus, to the extent that it raises journal quality, higher pay reduces the incentives for referees to choose to review articles. Thus, in order to be effective, referee pay must compensate for this latter effect. We show that this proves too costly for journals, and so zero pay is often the unique equilibrium outcome. This equilibrium is inefficient, and a subsidy to referee payments can restore efficiency.

JEL Classification: J3