Pay Peanuts and Get Monkeys? Evidence from NZ Universities

Abstract

Data constraints mean that relatively little is known about the relationship between pay levels and worker quality but the recently introduced Performance Based Research Funding (PBRF) system makes the NZ tertiary sector a natural setting for examining this issue. In NZ universities academics are paid the same regardless of area of specialisation a feature that suggests university disciplines with the most valuable outside opportunities will be least able to recruit high-quality researchers and/or motivate their researchers to be productive. I use academic performance and remuneration data to address this fundamental question: does the payment of (relative) peanuts result in the hiring of monkeys? Glenn Boyle is the executive director of ISCR and a professor of finance at Victoria University of Wellington