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Joseph Schumpeter Lecture: Paying Politicians: Theory and Evidence

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  • Timothy Besley

    (London School of Economics,)

Abstract

This paper looks at the theory behind the idea that paying politicians better will improve their performance. The paper lays out a political agency model with adverse selection and moral hazard where politicians are subject to two-period term limits. This model provides a number of predictions about how the pay of politicians affects agency problems. We also consider what happens when the pool of politicians is endogenous. The main ideas in the model are confronted with data on U.S. governors. (JEL: D72, J33) Copyright (c) 2004 The European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 2 (2004)
Issue (Month): 2-3 (04/05)
Pages: 193-215

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Handle: RePEc:tpr:jeurec:v:2:y:2004:i:2-3:p:193-215

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References

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  1. Poutvaara, Panu & Takalo, Tuomas, 2004. "Candidate Quality," IZA Discussion Papers 1195, Institute for the Study of Labor (IZA).
  2. Timothy Besley & Michael Smart, 2005. "Fiscal Restraints and Voter Welfare," STICERD - Political Economy and Public Policy Paper Series 06, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
  4. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
  5. Gersbach, Hans & Liessem, Verena, 2008. "Incentive contracts and elections for politicians with multi-task problems," Journal of Economic Behavior & Organization, Elsevier, vol. 68(2), pages 401-411, November.
  6. Daniel Diermeier & Michael Keane & Antonio Merlo, 2002. "A Political Economy Model of Congressional Careers," PIER Working Paper Archive 04-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2004.
  7. Caselli, Francesco & Morelli, Massimo, 2000. "Bad Politicians," CEPR Discussion Papers 2402, C.E.P.R. Discussion Papers.
  8. Michael Smart & Daniel M. Sturm, 2006. "Term limits and electoral accountability," LSE Research Online Documents on Economics 19771, London School of Economics and Political Science, LSE Library.
  9. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  10. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  11. Messner, Matthias & Polborn, Mattias K., 2004. "Paying politicians," Journal of Public Economics, Elsevier, vol. 88(12), pages 2423-2445, December.
    • Matthias Messner & Mattias Polborn, 2003. "Paying Politicians," Working Papers 246, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  12. Hans Gersbach, 2009. "Competition of politicians for wages and office," Social Choice and Welfare, Springer, vol. 32(4), pages 533-553, May.
  13. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  14. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
  15. Besley, Timothy J. & Case, Anne, 2002. "Political Institutions and Policy Choices: Evidence from the United States," CEPR Discussion Papers 3498, C.E.P.R. Discussion Papers.
  16. Avinash Dixit, 2002. "# Incentives and Organizations in the Public Sector: An Interpretative Review," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 696-727.
  17. Rafael Di Tella & Raymond Fisman, 2002. "Are Politicians Really Paid Like Bureaucrats?," NBER Working Papers 9165, National Bureau of Economic Research, Inc.
  18. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
  19. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  20. Carrillo, Juan D. & Mariotti, Thomas, 2001. "Electoral competition and politician turnover," European Economic Review, Elsevier, vol. 45(1), pages 1-25, January.
  21. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
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Citations

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Cited by:
  1. Ingmar Schumacher, 2012. "Political Stability, Corruption and Trust in Politicians," Working Papers hal-00763327, HAL.
  2. Ferraz, Claudio & Finan, Frederico S., 2008. "Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance," IZA Discussion Papers 3411, Institute for the Study of Labor (IZA).
  3. Rohini Pande & Timothy Besley & Vijayendra Rao, 2005. "Political Selection and the Quality of Evidence: Evidence form South India," Working Papers id:261, eSocialSciences.
  4. Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2011. "The Politicians' Wage Gap: Insights from German Members of Parliament," IZA Discussion Papers 5520, Institute for the Study of Labor (IZA).
  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. Maria De Paola & Vincenzo Scoppa, 2010. "Political Competition And Politician Quality: Evidence From Italian Municipalities," Working Papers 201005, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).
  7. Heléne Lundqvist, 2013. "Is it worth it? On the returns to holding political office," Working Papers 2013/14, Institut d'Economia de Barcelona (IEB).
  8. Florian Ade & Ronny Freier, 2011. "When Can We Trust Population Thresholds in Regression Discontinuity Designs?," Discussion Papers of DIW Berlin 1136, DIW Berlin, German Institute for Economic Research.
  9. Geys, Benny & Vermeir, Jan, 2008. "Party cues and yardstick voting," European Journal of Political Economy, Elsevier, vol. 24(2), pages 470-477, June.
  10. Jordi Blanes i Vidal & Mirko Draca & Christian Fons-Rosen, 2011. "The Power of K Street: New Research on the Economics of Lobbying," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 9(1), pages 8-11, 05.
  11. Geys, Benny & Mause, Karsten, 2011. "Moonlighting politicians: A survey and research agenda," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2011-101, Social Science Research Center Berlin (WZB).

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