CONTRACTS WITH ACADEMIC ADMINISTRATORS AND THE QUALITY OF HIRING IN THE UNIVERSITY

Anna Panova

In this paper we study the influence of academic and administrative contracts on the quality of hiring in the case when the choice of an academic position is a strategic one for a professor. Successful functioning of a university requires effective hiring. Since the talent of candidates at academic market is often unobservable for the university executive, the hiring is delegated to those who are better informed. Usually the most informed agents are heads of departments. In some universities such administrative positions are permanent, while in the other universities there is a regular rotation. Moreover in higher education both short term academic contracts and tenure contracts are present. Using a game theoretical model we study the emergence of moral hazard in hiring under different contract systems. We show that professors with low level of academic talent do not want to risk their career in case of a short academic term contract. Use of a short term administrative contract in this case negatively affects their stimulus for hiring more talented candidates; hence, the development of university is hindered. It is shown that both tenure contract and long term administrative contact without a right of termination permit to mitigate this problem and result in hiring of more talented candidates. The constructed model provides a possible explanation for rotation of heads of department in some universities and for existence of practically permanent heads of department in other universities.