Explicit Incentives, Implicit Incentives, and Performance: Evidence from Academic Tenure

Abstract

This paper tests agency theory on explicit and implicit incentives using a special sample. Specifically, we investigate the productivity (total number of papers) and impact (citations of papers) of the economics and finance faculty from top twenty-five schools and find that these academics’ impact remains consistent before and after tenure. Because impact is arguably a better measure of academics’ performance, our results cannot conclude that these academics slacked off after tenure. We argue that our results are consistent with the notion that if agents have sufficient implicit incentives, they may still exert costly effort even in the absence of explicit contracts.

Keywords: Explicit incentives, implicit incentives, academic tenure, faculty productivity

JEL Classification: J41, J44, I21, M5, D86, C25