Performance pay in the academy begets ... better performance. At least that appears to be the case north of the border :
Simon Fraser University Economics Professor John Chant says universities using a merit-based salary structure attract better students, obtain more research funding and generate more widely cited research than those that use a seniority-based approach.
That's a fair characterization of the paper's results, available here. In this news release, Professor Chant is quoted as saying, "A university's failure to put in place salary structures that provide incentives for productivity represents a breakdown of governance." Hear, hear. This paper is going on my reading list.