Academic Faculty Governance and Recruitment Decisions

We analyze the implications of the governance structure in academic faculties for their recruitment decisions when competing for new researchers. The value to individual members through social interaction within the faculty depends on the average status of their fellow members. In recruitment decisions, existing members trade off the effect of entry on average status of the faculty against alternative uses of the recruitment budget if no entry takes place. We show that the best candidates join the best faculties but that they receive lower wages than some lower-ranking candidates. We argue that in a second-best world majority voting is a good approximation to maximizing aggregate faculty surplus. Our main policy implication is that consensus-based faculties, such as many in Europe, could improve the well-being of their members if they liberalized their internal decision making processes.