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Moneycracy

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  • A. Fedele
  • P. Giannoccolo

Abstract

How do wage and other financial benefits affect the set of candidates for political office? In this theoretical paper, we answer the question by studying self-selection into politics of individuals with heterogeneous skills and heterogeneous motivations. Our predictions are in line with the efficiency wage results proposed by the extant literature when a benchmark model with skills as the sole relevant characteristic of individuals is considered. Welfare is increasing in the politicians'wage since the best, i.e., high-skilled, individuals are attracted to politics only if their remuneration covers their high opportunity costs. Our findings are remarkably different when motivation is also taken into account. Welfare is not likely to be maximized when the politicians'wage is relatively high, for high-skilled individuals with market-oriented rather than public-spirited motivation are attracted. Finally, we provide an overview of the labor market of politicians in Europe and suggest that the Italian Parliament might be representative of our inefficiency wage mechanism, which we call moneycracy.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp893.

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Date of creation: Jul 2013
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Handle: RePEc:bol:bodewp:wp893

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  1. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, Elsevier, vol. 78(3), pages 275-299, November.
  2. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial Talent, Motivation, and Self-Selection into Public Management," IZA Discussion Papers 4766, Institute for the Study of Labor (IZA).
  3. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(1), pages 85-114, February.
  4. Klaas Beniers & Robert Dur, 2007. "Politicians’ motivation, political culture, and electoral competition," International Tax and Public Finance, Springer, Springer, vol. 14(1), pages 29-54, February.
  5. Panu Poutvaara & Tuomas Takalo, 2003. "Candidate Quality," CESifo Working Paper Series 1106, CESifo Group Munich.
  6. Gagliarducci, Stefano & Nannicini, Tommaso, 2009. "Do Better Paid Politicians Perform Better? Disentangling Incentives from Selection," IZA Discussion Papers 4400, Institute for the Study of Labor (IZA).
  7. Fedele, Alessandro & Naticchioni, Paolo, 2013. "Moonlighting Politicians: Motivation Matters!," IZA Discussion Papers 7500, Institute for the Study of Labor (IZA).
  8. Timothy Besley & Maitreesh Ghatak, 2003. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2202, London School of Economics and Political Science, LSE Library.
  9. Antonio Merlo & Andrea Mattozzi, 2005. "Political Careers or Career Politicians?," 2005 Meeting Papers, Society for Economic Dynamics 740, Society for Economic Dynamics.
  10. Josse Delfgaauw & Robert A.J. Dur, 2002. "Signaling and Screening of Workers' Motivation," Tinbergen Institute Discussion Papers 02-050/3, Tinbergen Institute, revised 04 Mar 2005.
  11. 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.
  12. Anthony Heyes, 2003. "The Economics of Vocation or Why is a Badly Paid Nurse a Good Nurse?," Royal Holloway, University of London: Discussion Papers in Economics, Department of Economics, Royal Holloway University of London 03/4, Department of Economics, Royal Holloway University of London, revised Dec 2003.
  13. Timothy Besley & Torsten Persson & Daniel M. Sturm, 2010. "Political Competition, Policy and Growth: Theory and Evidence from the US," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1329-1352.
  14. Massimiliano Landi & Antonio Merlo & Vincenzo Galasso & Andrea Mattozzi, 2008. "The Labor Market of Italian Politicians," Labor Economics Working Papers 22461, East Asian Bureau of Economic Research.
  15. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(3), pages 835-864, August.
  16. Francesca Barigozzi & Gilberto Turati, 2012. "Human health care and selection effects. Understanding labor supply in the market for nursing1," Health Economics, John Wiley & Sons, Ltd., vol. 21(4), pages 477-483, 04.
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