Using individual level data on the salary of all UK university professors, matched to results on the performance of academic departments from the 2014 Research Excellence Framework, we study the relationship between academic salaries and research performance. The UK higher education sector is particularly interesting because professorial salaries are unregulated and the outcome of the official research evaluation is a key financial concern of universities. To frame our analysis, we present a simple model of university pay determination, which shows that pay level and pay inequality in a department are positively related to performance. Our empirical results confirm these theoretical predictions; we also find that the pay-performance relationship is weaker for the more established and better paying universities. Our findings are also consistent with the idea that higher salaries have been used by departments to recruit academics more likely to improve their performance.
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VoxEU Article on Academic Pay and Performance
Gianni De Fraja, Giovanni Facchini and John Gathergood
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