The impact of budget cuts and incentive wages on academic work

Johan Willner and Sonja Gronblom

International Review of Applied Economics, 2009, vol. 23, issue 6, 673-689

Abstract: Recent university reforms tend to mean budget cuts, economic incentives at all levels and a more powerful management, in the spirit of the new public management. Performance-based pay is often motivated through the principal-agent theory where agents would provide inadequate efforts under a fixed-wage regime. We amend the principal-agent model by introducing intrinsic motivation as one side of a multiple self. It turns out that the fixed regime can lead to higher creative efforts and a higher output per employee under reasonable circumstances. Performance-based pay leads to motivation crowding out if the wage approaches the threshold level for quitting.

Keywords: universities; new public management; performance-based pay (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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DOI: 10.1080/02692170903239853

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