DP7843 The Internal Economics of a University - Evidence from Personnel Data

Author(s): Catherine Haeck, Frank Verboven
Publication Date: May 2010
Keyword(s): career dynamics, incentives, learning, personnel economics
JEL(s): J30, J31, J45
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7843

Based on a rich personnel data set of a large university we find strong evidence for the existence of an internal labor market. First, the lowest academic rank is a strong port of entry and the highest rank is a port of exit. Second, wages do not follow external wage developments, since they follow administrative rules that have not been modified for a long time. We subsequently look at internal promotion dynamics to assess the relevance of alternative internal labor market theories. A unique feature of our data is that we have good measures of performance. Consistent with incentive theories of internal labor markets, research and teaching performance turn out to be crucial determinants of promotion dynamics. Learning theories of internal labor markets appear to have support when we do not account for observed performance, but the evidence becomes much weaker once we control for performance. Finally, we find that administrative rigidities play an important role in explaining promotion dynamics.