Discussion Paper Details

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Title: How Much Is That Star in the Window? Professorial Salaries and Research Performance in UK Universities

Author(s): Gianni De Fraja, Giovanni Facchini and John Gathergood

Publication Date: November 2016

Keyword(s): Higher education competition, Research Excellence Framework, Research funding, Salary inequality and University sector

Programme Area(s): Labour Economics and Public Economics

Abstract: We study the relationship between academic salaries and research performance. To this end, we use individual level data on the salary of all UK university professors, matched to results on the performance of academic departments from the 2014 government evaluation of research. The UK higher education sector is particularly interesting because professorial salaries are unregulated and the outcome of the official research evaluation of universities is one of their key financial and academic concerns. We first 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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Bibliographic Reference

De Fraja, G, Facchini, G and Gathergood, J. 2016. 'How Much Is That Star in the Window? Professorial Salaries and Research Performance in UK Universities'. London, Centre for Economic Policy Research.