Negative Returns to Seniority: New Evidence in Academic Markets
Prior studies of faculty pay have failed to account for match quality between faculty and university, leading to a positive bias in the estimated returns to seniority. When we account for match quality with a Topel two-step estimator, the negative returns to seniority double in size. Failure to account for quantity and quality of research results in a roughly equal bias in the opposite direction. Based on a sample of economics faculty at five research universities over a 21-year sample period, and accounting for both match quality and faculty research productivity, we estimate that the penalty for twenty years of seniority is 16 percent of salary.
Bratsberg, Bernt, James F. Ragan, Jr., and John T. Warren