Incentives in Economic Departments: Testing Tournaments?
Valerie Smeets () and
No 03-25, Working Papers from University of Aarhus, Aarhus School of Business, Department of Economics
Existing tests of tournament theory have recently been criticized for their failure to distinguish tournaments from other theories that have similar effects like standards and marginal productivity theory (Gibbs, 1994, 1996; Prendergast, 1999). In this paper, we propose a series of empirical tests that allow to make this distinction. We use a dataset of average wages by rank in US economic departments over the period 1977-1997 and link this information to individual production data to test whether wage gaps aﬀect the productivity and cooperative behavior of economists and to control for marginal productivity theory. We find that the wage gap is increasing along the hierarchy, even when controlling for production by rank. Moreover, wages are more sensitive to productivity for higher ranks. We find some evidence that higher wage gaps lead to higher productivity but not that wage gaps depend on the number of contestants nor that they lead to less cooperation.
Keywords: incentives; sorting; tournaments; standards; marginal productivity; economic departments (search for similar items in EconPapers)
JEL-codes: J00 M54 (search for similar items in EconPapers)
Pages: 31 pages
New Economics Papers: this item is included in nep-evo and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:aareco:2003_025
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