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Do Economics Departments With Lower Tenure Probabilities Pay Higher Faculty Salaries?
Articles and Chapters
  • Ronald G Ehrenberg, Cornell University
  • Paul J Pieper, University of Illinois at Chicago
  • Rachel A Willis, University of North Carolina at Chapel Hill
Publication Date
11-1-1998
Abstract
The simplest competitive labor market model asserts that if tenure is a desirable job characteristic for professors, they should be willing to pay for it by accepting lower salaries. Conversely, if an institution unilaterally reduces the probability that its assistant professors receive tenure, it will have to pay higher salaries to attract new faculty. Our paper tests this theory using data on salary offers accepted by new assistant professors at economics departments in the United States during the 1974-75 to 1980-81 period, along with data on the proportion of new Ph.D.s hired by each department between 1970 and 1980 that received tenure in the department or at a comparable or higher quality department within the first eight years of receipt of their Ph.D.s. We find evidence that supports the hypothesis that a tradeoff existed. Equally importantly, departments that offered low tenure probabilities to assistant professors also paid higher salaries to their tenured faculty. We attribute this to low tenure probabilities inducing higher effort from assistant professors and thus leading to higher productivity of faculty ultimately promoted to tenure.
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Suggested Citation
Ehrenberg, R. G, Pieper, P. J., & Willis, R. A. (1998). Do economics departments with lower tenure probabilities pay higher faculty salaries? [Electronic version]. Review of Economics and Statistics 80(4), 503-512.

Required Publisher Statement
© Massachusetts Institute of Technology Press. Reprinted with permission. All rights reserved.

Citation Information
Ronald G Ehrenberg, Paul J Pieper and Rachel A Willis. "Do Economics Departments With Lower Tenure Probabilities Pay Higher Faculty Salaries?" (1998)
Available at: http://works.bepress.com/ronald_ehrenberg/199/