Career Concerns in Knowledge Creation

Erina Ytsma (MIT)

Abstract: I study the effect of career concerns on research productivity through effort and selection effects using the introduction of performance pay in German academia as a natural experiment. To this end, I consolidated information from various, unstructured data sources to construct a data set that encompasses the affiliation history and publication records of the universe of academics in Germany. The reform introduced attraction and retention bonuses that give rise to strong career concerns, and relatively weaker on-the-job performance bonuses that take effect at a later point in time. I estimate the pure effort effect of these incentives in a DiD framework, comparing changes in research productivity in cohorts of academics that are differentially impacted by the reform. I find a positive effort effect of career concerns that is economically large; amounting to a 12 to 16% average increase in research productivity. This increase manifests itself most robustly as an increase in research quantity and persists for a number of years. Furthermore, the effort response is strongest and most robust for below-median productive academics, with increases in pure quantity as well as quality-adjusted research output, while top quartile academics do not significantly increase output. I then estimate the selection effect using the single-crossing property of the old and new wage schemes, which gives rise to selection incentives that are inversely related to age. Exploiting this variation in another DiD framework, I find that more productive academics are more likely to select into performance pay. Hence, performance pay, particularly in the form of career concerns, increases research output in academia through both effort and selection effects. However, because the effort effect is strongest for relatively less productive academics, while relatively more productive academics select into performance pay, the selection effect partially counteracts the effort effect.