Wage Structure and Research Performance of U. S. Economics Departments: Distinguishing Incentives from Sorting

In this paper, we look at the relationship between wage gaps between hierarchical layers and research performance using a dataset of average wages by rank in U.S. economics departments over the period 1977-1997. We link this information to individual production data and document the dynamics of individual productivity in economics departments. We find some evidence that higher wage gaps are associated with higher productivity. We also find that the wage gap partially reflects differences in past productivity production between ranks, in line with learning theory, suggesting the importance to distinguish between incentives and sorting.