Pay Peanuts and Get Monkeys? Evidence From Academia

Abstract

This article can be found at: The Berkeley Electronic Press Using some unique data from the New Zealand academic system this paper examines the relationship between worker quality and labour market value in a remuneration system that ignores opportunity cost differences. Based on a research assessment exercise undertaken in 2003 I find that the greater the difference between the value of a discipline's outside opportunities and its New Zealand academic salary the weaker its research performance in New Zealand universities. The latter apparently get what they pay for: disciplines in which compensation is lowest relative to opportunity cost are least able to recruit high-quality researchers. Paying peanuts attracts mainly monkeys.