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Outside Income and Moral Hazard: The Elusive Quest for Good Politicians

  • Stefano Gagliarducci

    ()

    (CEMFI)

  • Tommaso Nannicini

    ()

    (Universidad Carlos III de Madrid)

  • Paolo Naticchioni

    ()

    (Universit´e Catholique de Louvain and University of Rome La Sapienza)

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. Empirical evidence shows that bad but dedicated politicians come along with good but not fully committed politicians. There is in fact a nonnegligible fraction of citizens with remarkably high pre-election incomes who are appointed in parliament. These citizens are those who gain relatively more from being elected in terms of outside income. Conversely, they show higher absenteeism rates in parliament votes.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-164.

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Length: 44 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:bos:iedwpr:dp-164
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  1. Bénabou, Roland & Tirole, Jean, 2004. "Incentives and Prosocial Behaviour," CEPR Discussion Papers 4633, C.E.P.R. Discussion Papers.
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