DP3217 Perceived Income, Promotion and Incentives Effects

Author(s): Gil S Epstein, Melanie Ward-Warmedinger
Publication Date: February 2002
Keyword(s): perceived income, productivity, promotion, underpayment
JEL(s): J30
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3217

This Paper examines the disincentive effects of perceived underpayment on individuals’ exerted effort and promotion. To this end we develop a theoretical framework and obtain empirical evidence by analysing British academia data. We find that, tenured academics will tend to invest less effort in publishing as the difference between their perceived deserved income and actual income increases. On the other hand, for non-tenured academics this relationship is ambiguous. Our model predicts that if, however, tenured staff also derive utility directly from publication, over and above that associated with income and promotion, the difference between perceived and actual income has a smaller negative effect on the actual effort invested in research.