Vice chancellors who have been knighted earn 31 per cent more than those without public honours, according to a report by economists on top academics' pay. It predicts that the new openness about vice chancellors' salaries will spark an inflationary spiral.

The University of Bradford economists have also found that a scientific background boosts vice chancellors' pay by almost 15 per cent compared with their counterparts in the social sciences, arts or humanities.

Mark Baimbridge, co-author of the report, said other important factors were a professorship - which would increase pay by 13 per cent above that for a doctorate - and the level of university income from research grants. Newer universities were found to be paying their vice chancellors more generously than the traditional institutions whose bosses were on average three years older.

Rules coming into force this year will require all universities to disclose the salaries of their highest-paid employees and Mr Baimbridge predicts that this will cause vice chancellors' pay to rise from the average of around Pounds 93,000.

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"The existence of imperfect information within this labour market to date through the non-disclosure of remuneration could have operated to the advantage of hiring institutions," the report says.

"Moreover it is likely that some institutions have remunerated vice chancellors at an unmerited level when attempting to retain institution-specific knowledge and ex-pertise."

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Mr Baimbridge said he had carried out the analysis of the salaries of more than 80 vice chancellors - using raw data published in The THES on March 24 1995 - because it was an unexplored aspect of the controversy over top people's pay.

His economic model analyses significant factors affecting pay. Personal characteristics include vice chancellors' academic qualifications (ranging from bachelor degrees to doctor of science); formal titles; public honours (including CBEs which increase pay by 26 per cent); subject background; age and time in position. Significant institutional characteristics were research selectivity ratings; numbers of staff and students at the university; age of the institution; whether an old or new university and university income level. Average regional earnings and house prices were also taken into account.

Mr Baimbridge said that key performance and management indicators could play a larger role in setting vice chancellors' pay in the future once the notional "going rate" disappeared with disclosure. "A potential future development would be that as additional aspects of quality assessment are imposed upon academic and related staff the results of these indicators will translate into vice chancellors' remuneration," the report says.

The report found that vice chancellors appointed more recently could expect to receive higher rewards since the sector has become more competitive following the abolition of the binary divide.

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* An analysis of the remuneration of university vice chancellors and principals by Mark Baimbridge and Claire Simpson, department of social and economic studies, University of Bradford.