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Incentive contracts and elections for politicians with multi-task problems

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  • Gersbach, Hans
  • Liessem, Verena

Abstract

We consider a model with a politician facing a multi-task problem while in office. The reelection mechanism distorts the allocation of effort in favor of tasks whose outcomes can be measured more precisely than others. We show that a combination of elections and incentive contracts can alleviate this inefficiency. The incentive contract does not require direct information about the performance of the politician and is self-financing across terms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 68 (2008)
Issue (Month): 2 (November)
Pages: 401-411

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Handle: RePEc:eee:jeborg:v:68:y:2008:i:2:p:401-411

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Keywords: Elections Incentive contracts Multi-task problems;

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  7. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," Economics Working Papers 0020, Institute for Advanced Study, School of Social Science.
  8. Di Tella, Rafael & Fisman, Raymond, 2004. "Are Politicians Really Paid Like Bureaucrats?," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 477-513, October.
  9. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December.
  10. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  11. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  12. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," Scholarly Articles 4553030, Harvard University Department of Economics.
  13. Lockwood, Ben, 1997. "State-Contingent Inflation Contracts and Unemployment Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 286-99, August.
  14. Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Scholarly Articles 3450061, Harvard University Department of Economics.
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Cited by:
  1. Gersbach Hans, 2012. "Contractual Democracy," Review of Law & Economics, De Gruyter, vol. 8(3), pages 823-851, December.
  2. Hans Gersbach, 2009. "Competition of politicians for wages and office," Social Choice and Welfare, Springer, vol. 33(1), pages 51-71, June.
  3. Timothy Besley, 2004. "Joseph Schumpeter Lecture: Paying Politicians: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 193-215, 04/05.
  4. Hans Gersbach, 2007. "Anreize für Weitsicht und Wiederwahlschwellen: Wege zur besseren Demokratie," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(4), pages 389-397, November.
  5. Hans Gersbach, 2001. "Competition of Politicians for Incentive Contracts and Elections," CESifo Working Paper Series 406, CESifo Group Munich.
  6. Lockwood, Ben & Porcelli, Francesco, 2011. "Incentive Schemes for Local Government : Theory and Evidence from Comprehensive Performance Assessment in England," The Warwick Economics Research Paper Series (TWERPS) 960, University of Warwick, Department of Economics.
  7. Hans Gersbach & Verena Liessem, 2008. "Reelection threshold contracts in politics," Social Choice and Welfare, Springer, vol. 31(2), pages 233-255, August.
  8. Neunzig, Alexander R., 2002. "Mehraufgaben-Prinzipal-Agenten-Analyse: Effiziente Arbeitsverträge für abwechslungsbegrüßende Arbeitnehmer," CSLE Discussion Paper Series 2002-04, Saarland University, CSLE - Center for the Study of Law and Economics.
  9. Markus Müller, 2007. "Motivation of politicians and long-term policies," Public Choice, Springer, vol. 132(3), pages 273-289, September.

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