Scandal, Protection, and Recovery in Political Cabinets
AbstractEmpirical 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 InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 237.
Date of creation: 01 Jun 2005
Date of revision:
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-18 (All new papers)
- NEP-PBE-2006-03-18 (Public Economics)
- NEP-POL-2006-03-18 (Positive Political Economics)
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