Changing salary structure and faculty composition within business schools: Differences across sectors and state funding levels

• Publics experiencing negative state appropriation trends increased salaries less.
• These financially-stressed publics also decreased the number of professors.
• Salary gaps between the highest-paying schools and others grew in both sectors.
• Salary inequality within publics grew more than inequality within privates.
• Salary compression across ranks and salary inequality within ranks increased.

We employ new data to examine how public higher education institutions adjusted the salaries and composition of their business faculty during a financially challenging period. The data's multilevel structure allows us to describe changes in between-institution inequality, within-institution inequality, and their interaction. To examine the role of finances, we compare public and private institutions and employ difference and fixed-effects models to study the effect of state appropriations. Our results indicate that financially stressed publics almost matched the salary increases of their competitors between 1999 and 2006, but reductions in the number of professorsespecially full professorsaccompanied this salary growth. The salary gap across public institutions increased, while within institutions, salary compression and salary inequality within rank grew.