Market Forces in Academia: Student Future Earnings and Faculty Pay across Fields

51 Pages Posted: 1 Oct 2021 Last revised: 17 Jan 2024

See all articles by Claire Celerier

Claire Celerier

University of Toronto - Rotman School of Management

Boris Vallee

Harvard Business School - Finance Unit

Alexey Vasilenko

Vanderbilt University - Owen Graduate School of Management

Date Written: August 18, 2022

Abstract

Using data from over 100,000 university professors across public and private universities in the U.S. and Canada over more than 30 years, this study documents significant and growing wage heterogeneity among faculty, primarily driven by differences across academic fields. We find a strong correlation between professor salaries and student future earnings, both across and within fields and institutions. By employing a shift-share instrument based on persistent student placement patterns, we provide robust evidence of a causal relationship between student future earnings and faculty compensation. Notably, the elasticity of faculty wages to student earnings varies substantially across fields. Our analysis suggests that this variation is influenced by differences in tuition and donation revenues between fields, as well as disparities in faculty bargaining power.

Keywords: Labor and Finance, Compensation, Economics of Education, Com- petition for Talent, Research Institutions

JEL Classification: J31, I23, A23

Suggested Citation

Celerier, Claire and Vallee, Boris and Vasilenko, Alexey, Market Forces in Academia: Student Future Earnings and Faculty Pay across Fields (August 18, 2022). Available at SSRN: https://ssrn.com/abstract=3933193 or http://dx.doi.org/10.2139/ssrn.3933193

Claire Celerier (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Boris Vallee

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States

Alexey Vasilenko

Vanderbilt University - Owen Graduate School of Management ( email )

401 21st Avenue South
Nashville, TN 37203
United States

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