Pay Peanuts and Get Monkeys? Evidence from Academia

34 Pages Posted: 8 Aug 2006

See all articles by Glenn Boyle

Glenn Boyle

University of Canterbury - Economics and Finance; Sapere Research Group

Date Written: October 8, 2006

Abstract

Does the payment of peanuts tend to result in the hiring of monkeys? Unfortunately, privacy and other constraints on data mean that surprisingly little is known about this issue. In this paper, I use some unique data from the New Zealand academic system to provide direct evidence that pay levels do matter in determining the available pool of quality workers. Academic salaries are independent of discipline in New Zealand universities, but because different disciplines face different outside labour market opportunities, their ability to recruit high-quality academics is also likely to vary. Utilising the results from a national research assessment exercise first undertaken in 2003, I find that discipline research performance is indeed negatively related to the value of outside opportunities: the greater a discipline's average salary in United States universities, the weaker its research performance in New Zealand universities. The latter apparently get what they pay for: disciplines in which the fixed compensation is high relative to opportunity cost are best able to recruit high-quality researchers and/or motivate their researchers to be productive. Paying (relative) peanuts attracts mainly monkeys.

Keywords: Remuneration, incentives, research performance

JEL Classification: I28, J33, J44, M52, G00

Suggested Citation

Boyle, Glenn, Pay Peanuts and Get Monkeys? Evidence from Academia (October 8, 2006). Available at SSRN: https://ssrn.com/abstract=922180 or http://dx.doi.org/10.2139/ssrn.922180

Glenn Boyle (Contact Author)

University of Canterbury - Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Sapere Research Group ( email )

Level 9, Pencarrow House
1 Willeston St
Wellington, 6140
New Zealand

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