Multi-task agents and incentives: the case of teaching and research for university professors

This paper exploits a natural experiment to study the effects of providing stronger research incentives to faculty members on universities' average teaching and research performance. The results indicate that professors are induced to reallocate effort from teaching towards research. Moreover, tighter research requirements affect the faculty composition, as they lead lower-research-ability professors to leave. Given the estimated positive correlation between teaching and research ability, those who leave are also characterized by lower teaching ability. The average effect on teaching for the university is therefore ambiguous, as positive composition effects countervail effort substitution.