Academic pay in the United Kingdom and the United States: The differential returns to productivity and the lifetime earnings gap

Document Type

Conference Proceeding

Publication Date

1-1-2007

Abstract

This paper estimates earnings functions for two samples of U.K. and U.S. academic economists. Despite significant differences in compensation schemes, a comparably specified human capital earnings model does a good job explaining earnings variations for academic economists in both countries. Our estimates suggest that rewards for research are more immediate and direct in the United States. Because of the national salary scale, the payoffs to experience and seniority are greater and the payoffs to research are lower in the United Kingdom than in the United States. After adjusting for productivity and demographic factors, we find that U.S. economists are paid approximately 40% more than otherwise equivalent economists in the United Kingdom. Simulating career age-earnings profiles for both markets, we find that the earnings gap widens with experience for relatively productive research economists and may even narrow with age for relatively less productive research economists. Nevertheless, the cumulative lifetime earnings foregone are substantial for research and nonresearch economists in the United Kingdom.

Publication Source (Journal or Book title)

Southern Economic Journal

First Page

717

Last Page

732

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