Economists in schools of public affairs, and compensating differentials

New Zealand doesn't have any schools of public affairs, but they are a reasonably common feature of U.S. universities (Victoria University does have a School of Government, but I'm not sure that is quite the same). Economists in the U.S. are employed in both economics departments, and in schools of public affairs. You would think that they would be paid the same (conditional on their 'quality' as an academic) regardless of which school or department they are employed in. Not so, according to this 2019 working paper by Lori Taylor, Kalena Cortes, and Travis Hearn (all Texas A&M University).

They first compile salary and demographic data from 2152 academics employed in schools of public affairs, economics departments, or political science departments, from the 33 public universities with schools of public affairs ranked in the top 50 in the U.S. (the other 17 are private universities, where data on salaries are not readily available). Their data demonstrate three key facts:

First, leading schools of public affairs employ a large number of economists. The 33 leading public affairs departments in our sample employed more than 100 economists, or 12 percent of the economists in the sample.

Second, a disproportionate number of the economists employed by schools of public affairs were female... 19 percent of the faculty in departments of economics were female; whereas 23 percent of the economists in departments of political science were female and 35 percent of the economists in schools of public affairs were female...

Third, average salaries in schools of public affairs were lower than those in traditional economics departments. On average—and without adjustment for faculty rank or institution reporting differences—salaries were 33.5 percent higher in departments of economics than they were in schools of public affairs. Among economists, average salaries were 11 percent higher in departments of economics than they were in schools of public affairs.

Taylor et al. then go on to explore the differences in salaries between schools of public affairs and departments of economics (and political science) in a bit more detail. In particular, they are interested in whether, given that schools of public affairs employ more women, and there is a gender gap in salaries, the proportion of female faculty makes a difference. It turns out it doesn't, and they report that:

...we found a significant, negative differential for female faculty members, but controlling for gender did not eliminate the public affairs discount...

...female faculty members were paid significantly less than male faculty members regardless of discipline or department.

Interestingly, there was no difference arising from the seniority of faculty in the schools or departments either. However, then they go on to investigate measures of 'research productivity' (or quality) and find that:

...controlling for citation metrics as well as years since degree and faculty rank, we estimated that economists in schools of public affairs earned at least 28 percent more than otherwise similar faculty members, and economists in departments of economics earned 17 percent more than economists in schools of public affairs. On the other hand, political scientists were better paid in a school of public affairs than in a traditional department of political science, even after controlling for research productivity.

Including citation metrics (as a measure of research productivity) rendered the gender difference in salaries statistically insignificant, suggesting that the difference in salaries was capturing differences in research productivity. That is quite a different result from much of the earlier literature on this topic (for example, see my earlier post here).

This working paper seems a bit unfocused to me. It starts with the premise of comparing salaries between schools of public affairs and departments of economics, but quickly strays into evaluating the gender gap in salaries. The analysis and the exposition would be a lot clearer if they could distinguish those two aims. The finding that the gender gap is explained by differences in research productivity needs a bit more unpacking, especially given that it contradicts the previous literature.

However, the most interesting finding to me is the salary penalty for economists who work in schools of public affairs, and that the penalty remains statistically significant even after controlling for research productivity. Departments of economics have been labelled a toxic environment for women (for example, see my earlier post here). Could the public affairs salary penalty reflect a compensating differential? Are (female) economists willing to accept a reduction in salary in order to locate in a department that has a more welcoming environment (and in reverse, do they require a higher salary to compensate for the toxic working environment in a department of economics)? The public affairs salary penalty for economists was higher for women than men, and was statistically significant in some (but not all) of Taylor et al.'s results, after controlling for research productivity (see Table 4 in the working paper). That provides some further evidence that the salary penalty might be capturing a compensating differential that is more salient for women than for men.

On the face of it, the salary penalty for working in a school of public affairs would tend to suggest that economists should avoid working there. That probably holds true for male economists. However, if it reflects a positive compensating differential, which it probably does for women, then that changes the parameters of the decision and may favour jobs at the schools of public affairs. The problem with taking that interpretation though, is that it may 'lock in' the cultural differences between schools and departments that are the very source of the compensating differential. Food for thought.

[HT: Marginal Revolution, last year]