Academia or the Private Sector? Sorting of Agents into Output-Maximizing Institutions

Marie-Louise Vierø ()

No 1198, Working Papers from Queen's University, Department of Economics

Abstract: This paper develops an equilibrium sorting model with utility maximizing researchers who differ in their ability on one side of the market, and research output-maximizing universities and an outside sector on the other side. In equilibrium, the top of the ability distribution is allocated to the academic sector, while the bottom of the ability distribution is allocated to the outside sector. For low values of the outside option, the academic sector is unaffected by it and some researchers exit from academia involuntarily. For higher values of the outside option, an increase in the value decreases the difference in average quality between the higher and lower ranked universities. The paper also consider the universities' problems of allocating resources across fields. The better university will typically be active in both fields while the lower ranked university will often specialize. The latter result can explain why a highly ranked university for example typically will have both a department of theoretical physics and a department of applied physics, while a lower ranked university typically focuses on the more applied field.

Keywords: Sorting; Universities; Academia; Optimizing Institutions; Ranking (search for similar items in EconPapers)
JEL-codes: C78 D02 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-sog
Date: 2008-12
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:1198

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