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Scandal, Protection, and Recovery in Political Cabinets

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Author Info
David P. Myatt
Torun Dewan

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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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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: 2005
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Handle: RePEc:oxf:wpaper:237

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

Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
D20 - Microeconomics - - Production and Organizations - - - General
H10 - Public Economics - - Structure and Scope of Government - - - General

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    Other versions:
  2. Diermeier, Daniel & Merlo, Antonio, 2000. "Government Turnover in Parliamentary Democracies," Journal of Economic Theory, Elsevier, vol. 94(1), pages 46-79, September. [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. MacLeod, W Bentley & Malcomson, James M, 1988. "Reputation and Hierarchy in Dynamic Models of Employment," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 832-54, August. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
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