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Scandal, Protection, and Recovery in Political Cabinets

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  • David P. Myatt
  • Torun Dewan

Abstract

Empirical evidence suggests that a Prime Minister can benefit from firing ministers who are involved in political scandals. We explore a model in which a minister`s exposure to scandals is positvely related to his policy activism, so that a Prime Minister may wish to protect him from resignation calls. We find that protection can sometimes work against the objective of encouraging activism: it makes a minister`s position more valuable to him and hence can encourage him to sit tight by moderating his activities. On the other hand, an exogenous increase in exposure to scandals may lead a minister to live for today by pursuing controversial policy innovations. The Prime Minister`s ability to protect ministers from resignation calls is limited by her short-term incentive to fire. She may, however, enhance her credibility by building a collective reputation with the wider membership of her cabinet; we show that heterogeneity of cabinet membership can play an important role.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 237.

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Date of creation: 01 Jun 2005
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Handle: RePEc:oxf:wpaper:237

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Keywords: Ministerial Resignations; Reputation; Relational Contracts; Multi-Market Contract; Protection; Incentives;

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  1. Francesco Caselli & Massimo Morelli, 2001. "Bad Politicians," NBER Working Papers 8532, National Bureau of Economic Research, Inc.
  2. Bentley MacLeod & James M. Malcomson, 1985. "Reputation and Hierarchy in Dynamic Models of Employment," Working Papers 628, Queen's University, Department of Economics.
  3. Ernesto Dal Bo & Rafael Di Tella, 2003. "Capture by Threat," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1123-1152, October.
  4. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
  5. Diermeier, Daniel & Merlo, Antonio, 2000. "Government Turnover in Parliamentary Democracies," Journal of Economic Theory, Elsevier, vol. 94(1), pages 46-79, September.
  6. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
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