I think part of the answer is self-selection. Economists who are naturally more abstract will have a harder time teaching MBAs and will gravitate toward economics departments. The PhD students there will not mind the higher level of abstraction. By contrast, economists of a more practical and empirical frame of mind will gravitate toward business schools, where their practicality is valued and the salaries are typically higher.
Wednesday, June 3, 2009
Mankiw discusses the differences between B-school and Liberal Arts economics professors in this post. Here's a passage: