Adverse Selection among the Kiwis

The Unknown Professor points us to Pay Peanuts and Get Monkeys? Evidence from Academia a clever paper on adverse selection in academia.  In New Zealand academic salaries are mostly independent of discipline so someone from a high-flying field like economics or finance is giving up a big American salary to teach in NZ compared to say a professor of literature.  As a result, we ought to expect that the greater the salary in the U.S. the lower the quality in New Zealand.

…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.

It’s a good paper, thus I expect the author will soon leave New Zealand.


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