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Outside income and moral hazard : the elusive quest for good politicians

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Author Info
Stefano Gagliarducci ()
Tommaso Nannicini ()
Paolo Naticchioni ()

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Abstract

In most modern democracies elected officials can work in the private sector while appointed in parliament. We show that when the political and market sectors are not mutually exclusive, a trade-off arises between the quality of elected officials and the effort they exert in political life. If high-ability citizens can keep earning money outside of parliament, they will be more likely to run for election; for the same reason, they will also be more likely to shirk once elected. These predictions are confronted with a unique dataset about members of the Italian Parliament from 1996 to 2006. The empirical evidence shows that bad but dedicated politicians come along with good but not fully committed politicians. There is in fact a non-negligible fraction of citizens with remarkably high pre-election income who are appointed in parliament. These citizens are those who gain relatively more from being elected in terms of outside income. Conversely, they are less committed to the parliamentary activity in many respects, like voting attendance and bills sponsorship.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we073218.

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Date of creation: Dec 2007
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Handle: RePEc:cte:werepe:we073218

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Related research
Keywords: Politicians Moral hazard Adverse selection Absenteeism Outside income

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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(2), pages 183-239, September.
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  2. Mattozzi, Andrea & Merlo, Antonio, 2007. "Political Careers or Career Politicians?," CEPR Discussion Papers 6164, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Caselli, Francesco & Morelli, Massimo, 2004. "Bad politicians," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 759-782, March. [Downloadable!] (restricted)
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  4. BENABOU, Roland & TIROLE, Jean, 2003. "Incentives and Prosocial Behavior," IDEI Working Papers 389, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jan 2006. [Downloadable!]
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  5. Lott, John R, Jr, 1990. "Attendance Rates, Political Shirking, and the Effect of Post-Elective Office Employment," Economic Inquiry, Oxford University Press, vol. 28(1), pages 133-50, January.
  6. Daniel Diermeier & Michael Keane & Antonio Merlo, 2005. "A Political Economy Model of Congressional Careers," American Economic Review, American Economic Association, vol. 95(1), pages 347-373, March. [Downloadable!] (restricted)
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  7. Michael P. Keane & Antonio Merlo, 2007. "Money, Political Ambition, and the Career Decisions of Politicians," PIER Working Paper Archive 07-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  8. Messner, Matthias & Polborn, Mattias K., 2004. "Paying politicians," Journal of Public Economics, Elsevier, vol. 88(12), pages 2423-2445, December. [Downloadable!] (restricted)
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    • Matthias Messner & Mattias Polborn, . "Paying Politicians," Working Papers 246, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  9. Mattozzi, Andrea & Merlo, Antonio, 2007. "Mediocracy," CEPR Discussion Papers 6163, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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    • Andrea Mattozzi & Antonio Merlo, 2007. "Mediocracy," NBER Working Papers 12920, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Andrea Mattozzi & Antonio Merlo, 2006. "Mediocracy," PIER Working Paper Archive 07-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  10. Bender, Bruce & Lott, John R, Jr, 1996. " Legislator Voting and Shirking: A Critical Review of the Literature," Public Choice, Springer, vol. 87(1-2), pages 67-100, April.
  11. Panu Poutvaara & Tuomas Takalo, 2007. "Candidate quality," International Tax and Public Finance, Springer, vol. 14(1), pages 7-27, February. [Downloadable!] (restricted)
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  12. Ernesto Dal Bó & Pedro Dal Bó & Jason Snyder, 2007. "Political Dynasties," NBER Working Papers 13122, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ferraz, Claudio & Finan, Frederico, 2008. "Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance," IZA Discussion Papers 3411, Institute for the Study of Labor (IZA). [Downloadable!]
  2. Becker, Johannes & Peichl, Andreas & Rincke, Johannes, 2008. "Politicians' Outside Earnings and Electoral Competition," Discussion Papers in Economics 2206, University of Munich, Department of Economics. [Downloadable!]
    Other versions:
  3. Gagliarducci, Stefano & Nannicini, Tommaso & Naticchioni, Paolo, 2008. "Electoral Rules and Politicians’ Behavior: A Micro Test," IZA Discussion Papers 3348, Institute for the Study of Labor (IZA). [Downloadable!]
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