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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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References

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  4. Dixit, Avinash & Grossman, Gene M & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 752-69, August.
  5. Daniel Diermeier & Michael Keane & Antonio Merlo, 2004. "A Political Economy Model of Congressional Careers," Discussion Papers 1387, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Rafael Di Tella & Raymond Fisman, 2002. "Are Politicians Really Paid Like Bureaucrats?," NBER Working Papers 9165, National Bureau of Economic Research, Inc.
  7. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
  8. 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.
  9. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December.
  10. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  11. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  12. Persson, Torsten & Svensson, Lars E O, 1989. "Why a Stubborn Conservative Would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 325-45, May.
  13. Jensen, Henrik, 1997. "Credibility of Optimal Monetary Delegation," American Economic Review, American Economic Association, vol. 87(5), pages 911-20, December.
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Citations

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Cited by:
  1. Hans Gersbach & Verena Liessem, 2008. "Reelection threshold contracts in politics," Social Choice and Welfare, Springer, vol. 31(2), pages 233-255, August.
  2. Hans Gersbach, 2009. "Competition of politicians for wages and office," Social Choice and Welfare, Springer, vol. 32(4), pages 533-553, May.
  3. Gersbach, Hans, 2008. "Contractual Democracy," CEPR Discussion Papers 6763, C.E.P.R. Discussion Papers.
  4. 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.
  5. Ben Lockwood & Francesco Porcelli, 2013. "Incentive Schemes for Local Government: Theory and Evidence from Comprehensive Performance Assessment in England," American Economic Journal: Economic Policy, American Economic Association, vol. 5(3), pages 254-86, August.
  6. Markus Müller, 2007. "Motivation of politicians and long-term policies," Public Choice, Springer, vol. 132(3), pages 273-289, September.
  7. 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.
  8. Hans Gersbach, 2004. "Competition of Politicians for Incentive Contracts and Elections," Public Choice, Springer, vol. 121(1), pages 157-177, October.
  9. 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.

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