Are There Fast Tracks in Economics Departments?

1. Are There Fast Tracks in Economics Departments? Valerie Smeets (UC3M & CCP, ASB) Madrid, October 2007

2. Motivation • Careers in organizations • Specific aspect – timing of promotions • Studies using personnel records have found the existence of fast tracks: workers promoted quickly at one level of the hierarchy are promoted more quickly at the next level • But the question of why this is observed remains open • Baker et al. (1994) interpret this finding as evidence of learning • Ariga et al. (1999) suggest more elaborate models incorporating firm specific human capital acquisitionto explain the existence of fast tracks

3. Theory • Building blocks model of careers (Gibbons-Waldman (1999)) • Learning, job assignment and on the job human capital acquisition • Individuals are assigned to the job where they are the most productive on the basis of their expected effective ability • Firms learn about the effective ability of individuals by observing their performance • Effective ability is a combination of innate ability (natural talent) and accumulated human capital (experience) • Workers climb job ladder as experience increases • Serial correlation in promotions (fast tracks) • Other predictions on careers, wage, etc.

4. Theory • Literature on biased contests • Organizations might choose to favor (or handicap) the winner of the first round in the successive rounds of a multi-period promotion contest (Meyer (1991), (1992) and Prendergast (1992)) • INCENTIVES: favor the winner • Improve the incentives of identical agents in the first period • Even if the bias leads to a loss of incentives in the second period, it is outweighed by the gain of incentives in the first period.

5. Theory • Literature on biased contests • SORTING: • if someone has to be promoted, favor the winner • if not, handicap the winner • INCENTIVES & SORTING: • Trade-off • optimal to handicap the winner for incentives (to offset the likely edge in ability) while optimal to favor the winner for learning

6. This paper • Test for the existence of fast tracks in academia • Similar to previous studies in other industries (Baker et al. (1994), Ariga et al. (1999), Belzil and Bognanno (2004), Acosta (2006)) • Drawback of previous papers: lack performance measure, makes it difficult to test why fast tracks exist (except Chiappori et al. (1999)) • Advantage of our approach: • Data on individual performance allow us to test the reasons behind fast tracks

7. Data • Panel on career and performance pattern of top 1000 academic economists (created by CSW, 2006, JLEO) • Econlit for individual and university performances (publications) • Top 1000 economists over 1987-1998 • CV’s downloaded from internet • Economists with balanced panel of entire career – 652 individuals • Survey on tenure decision (60%+ response rate) • To have data suited to fast tracks analysis • Individuals must have become professor in 1998 • Individuals must have followed the hierarchical ladder • Individuals must have spent their entire career in universities 323 individuals

8. Data 323 economists over 1987-1998 Individual performance (research) over 1969-1998 Career path over 1969-1998 Job title, promotion & University changes Controls: age, experience, education, nationality Job level 1: assistant Job level 2: associate Job level 3: professor Universities performance (research) over 1970-1998 Survey on tenure, teaching & consulting only tenure data used

9. Summary Statistics

10. Summary Statistics

11. Baker, Gibbs and Holmström (1994)

13. Summary Statistics

14. Empirical Analysis • Whether there exists a positive relationship between the time spent at the 1st hierarchical level (assistant professor) and the time spent at the 2nd hierarchical level (associate professor) • Controlling for individual performance • Test alternative explanations for our results • Productivity pattern of individuals with different career profiles

16. Results • Having been promoted quickly in the past decreases the chances of being quickly promoted in the future, evidence of a handicapping policy • The handicap is relative: the ”winner” is handicapped in the 2nd stage by 54% of the time he gained in the 1st stage • The handicap can be beaten if the performance during the 2nd stage is high enough. Moreover, the effect of performance decreases with experience, in line with learning theory • The handicap does not survive the whole career: individuals who have experienced quick past promotions are the ones who have the fastest careers

17. Results • These findings can be explained by the need to balance incentives and sorting issues as • a negative bias set against the faster improves incentives and reestablishes a balanced contest [Meyer (1992) & Prendergast (1992)] • but a strong handicap can be detrimental for sorting issues, as it may lead to the selection of inadequate individuals [Meyer (1991)] • Incentives and sorting matter in academia: using relative handicaps may help to balance these concerns

18. Alternative Explanations • Human capital accumulation • Individuals receiving a fast promotion at the beginning have accumulated less human capital and have to wait longer for their next promotion • Or administrative rules • Tenure • Tenured and untenured associates exhibit different behaviors • Endogeneity • Number of years as assistant is determined by the productivity of the individual during this period and individual productivity may be correlated across time

19. Human Capital Accumulation • Add quadratic in experience in previous estimations • colinearity? • Test: if human capital accumulation is all that matters for career paths, then individuals who were slow at the beginning should have better careers than those who were fast, due to a higher level of human capital • rejected

20. Tenure

21. Endogeneity • Two steps strategy: • First, regress # years as assistant over the performance when assistant and performance interacted with experience • Then replace # years as assistant by its estimated value, NASTPE, in the estimation of # years as associate • May use the residual: as the residual represents the unexplained part of the time spent as assistant, a negative value could be interpreted as a promotion that occurred earlier than it should have been

22. Endogeneity

23. Productivity Patterns and Careers • Are fast individuals more productive after being promoted to full professor. Is the early selection effective? • Compare the average productivity of four groups of individuals: • Fast tracks: spent less than 4 years in each layer • Early fast: spent less than 4 years at the first layer and more than 3 years at the second layer • Late fast: spent more than 3 years at the first layer and less than 4 years at the second layer • Not fast: spent more than 4 years at each layer

24. Productivity Patterns and Careers

25. Productivity Patterns and Careers

26. Productivity Patterns and Careers

27. Productivity Patterns and Careers

28. Productivity Patterns and Careers • This handicapping policy seems to lead to an effective selection process as the fastest individuals are the best performers ex post: effective cherry picking • Fast tracks are also the most productive along the whole career • Effective selection as fast tracks always exhibit a higher productivity // handicaps used for sorting issues

29. Conclusions • Test alternative theories of fast tracks in economics departments, using performance data • A priori no relation btw time spent at each layer • But when controlling for performance, evidence of a “partial” handicap (>< systematic fast tracks effect) • Individuals can beat this handicap if they achieve a given level of productivity • Seem in line with the incentives and sorting story (having a “partial” handicap) • Among different career patterns, fast individuals are always the most productive