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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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  1. 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.
  2. 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.
  3. 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.
  4. Timothy Besley & Maitreesh Ghatak, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 2202, London School of Economics and Political Science, LSE Library.
  5. Francesco Caselli & Massimo Morelli, 2001. "Bad Politicians," NBER Working Papers 8532, National Bureau of Economic Research, Inc.
  6. Panu Poutvaara & Tuomas Takalo, 2007. "Candidate quality," International Tax and Public Finance, Springer, vol. 14(1), pages 7-27, February.
  7. Smart, Michael & Sturm, Daniel M, 2004. "Term Limits and Electoral Accountability," CEPR Discussion Papers 4272, C.E.P.R. Discussion Papers.
  8. Carrillo, Juan D. & Mariotti, Thomas, 2001. "Electoral competition and politician turnover," European Economic Review, Elsevier, vol. 45(1), pages 1-25, January.
  9. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February.
  10. 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.
  11. 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.
  12. Gersbach, Hans & Liessem, Verena, 2003. "Incentive Contracts and Elections for Politicians with Multi-Task Problems," CEPR Discussion Papers 4075, C.E.P.R. Discussion Papers.
  13. Gersbach, Hans, 2004. "Competition of Politicians for Wages and Office," CEPR Discussion Papers 4261, C.E.P.R. Discussion Papers.
  14. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  15. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
  16. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  17. 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.
  18. 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.
  19. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  20. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
  21. 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.
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Citations

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Cited by:
  1. Claudio Ferraz & Frederico Finan, 2009. "Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance," NBER Working Papers 14906, National Bureau of Economic Research, Inc.
  2. 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.
  3. Andreas Peichl & Nico Pestel & Sebastian Siegloch, 2011. "The Politicians' Wage Gap: Insights from German Members of Parliament," SOEPpapers on Multidisciplinary Panel Data Research 366, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Rohini Pande & Timothy Besley & Vijayendra Rao, 2005. "Political Selection and the Quality of Evidence: Evidence form South India," Working Papers id:261, eSocialSciences.
  5. Ingmar Schumacher, 2012. "Political Stability, Corruption and Trust in Politicians," Working Papers hal-00763327, HAL.
  6. Maria Paola & Vincenzo Scoppa, 2011. "Political competition and politician quality: evidence from Italian municipalities," Public Choice, Springer, vol. 148(3), pages 547-559, September.
  7. 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.
  8. Heléne Lundqvist, 2013. "Is it worth it? On the returns to holding political office," Working Papers 2013/14, Institut d'Economia de Barcelona (IEB).
  9. Geys, Benny & Vermeir, Jan, 2008. "Party cues and yardstick voting," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-05, Social Science Research Center Berlin (WZB).
  10. 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.
  11. Felix Arnold & Björn Kauder & Niklas Potrafke, 2014. "Outside Earnings, Absence, and Activity: Evidence from Germany Parliamentarians," CESifo Working Paper Series 4900, CESifo Group Munich.
  12. Shaun Larcom & Mare Sarr & Tim Willems, 2014. "Dictators Walking the Mogadishu Line: How Men Become Monsters and Monsters Become Men," HiCN Working Papers 176, Households in Conflict Network.
  13. 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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