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Moneycracy

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. Klaas J. Beniers & Robert Dur, 2004. "Politicians' Motivation, Political Culture, and Electoral Competition," Tinbergen Institute Discussion Papers 04-065/1, Tinbergen Institute, revised 16 Aug 2005.
  2. Panu Poutvaara & Tuomas Takalo, 2007. "Candidate quality," International Tax and Public Finance, Springer, vol. 14(1), pages 7-27, February.
  3. Stefano Gagliarducci & Tommaso Nannicini, 2013. "Do Better Paid Politicians Perform Better? Disentangling Incentives From Selection," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 369-398, 04.
  4. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
  5. 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, vol. 120(3), pages 835-864, August.
  6. Mattozzi, Andrea & Merlo, Antonio, 2007. "Political Careers or Career Politicians?," CEPR Discussion Papers 6164, C.E.P.R. Discussion Papers.
  7. Antonio Merlo & Vincenzo Galasso & Massimiliano Landi & Andrea Mattozzi, 2008. "The Labor Market of Italian Politicians," Working Papers 15-2008, Singapore Management University, School of Economics, revised Oct 2008.
  8. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial talent, motivation, and self-selection into public management," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 654-660, October.
  9. Tim Besley & Maitreesh Ghatak, 2005. "Competition and incentives with motivated agents," LSE Research Online Documents on Economics 928, London School of Economics and Political Science, LSE Library.
  10. 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.
  11. Heyes, Anthony, 2005. "The economics of vocation or 'why is a badly paid nurse a good nurse'?," Journal of Health Economics, Elsevier, vol. 24(3), pages 561-569, May.
  12. Josse Delfgaauw & Robert Dur, 2003. "Signaling and Screening of Workers' motivation," CESifo Working Paper Series 1099, CESifo Group Munich.
  13. 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.
  14. 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.
  15. Fedele, Alessandro & Naticchioni, Paolo, 2013. "Moonlighting Politicians: Motivation Matters!," IZA Discussion Papers 7500, Institute for the Study of Labor (IZA).
  16. Francois, Patrick, 2000. "'Public service motivation' as an argument for government provision," Journal of Public Economics, Elsevier, vol. 78(3), pages 275-299, November.
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