Incentive Structures for Professors. A Comparison of Basic Mechanisms in US and German Higher Education.

Our paper analyzes the incentive structures for academics in US and German Higher Education that have developed under different institutional frameworks. Both incentive structures are internally consistent in the sense that they fit into their specific institutional background. Whereas the German incentive structure focuses on the individual professor the American system puts stronger emphasis on the reputation of the university and the school the professor is employed at. Nevertheless, the American incentive structure generates superior results when looking at criteria like the management of reputation, the selection of future academics, research output and the allocation of human capital in general.