Negative Returns to Seniority: New Evidence in Academic Markets
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Bratsberg, Bernt, James F. Ragan, Jr., and John T. Warren
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.