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Incentive Contracts and Elections for Politicians with Multi-Task Problems

  • Gersbach, Hans
  • Liessem, Verena

We consider a model with a politician facing a multi-task problem while in office. The re-election mechanism distorts the allocation of effort in favour of tasks whose outcomes can be measured more precisely than others. We show that a combination of elections and incentive contracts can alleviate this inefficiency. The incentive contract does not require information about the performance of the politician and is self-financing across terms.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4075.

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Date of creation: Oct 2003
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Handle: RePEc:cpr:ceprdp:4075
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  1. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," Scholarly Articles 4553030, Harvard University Department of Economics.
  2. Daniel Diermeier & Michael Keane & Antonio Merlo, 2004. "A Political Economy Model of Congressional Careers," Discussion Papers 1387, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  4. Hans Gersbach & Maik T. Schneider, 2009. "Tax Contracts and Elections," CER-ETH Economics working paper series 09/123, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
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  7. Jensen, Henrik, 1997. "Credibility of Optimal Monetary Delegation," American Economic Review, American Economic Association, vol. 87(5), pages 911-20, December.
  8. Eric Maskin, 2003. "The Politician and the Judge: Accountability in Government," Theory workshop papers 505798000000000076, UCLA Department of Economics.
  9. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  10. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  11. Rafael Di Tella & Raymond Fisman, 2002. "Are Politicians Really Paid Like Bureaucrats?," NBER Working Papers 9165, National Bureau of Economic Research, Inc.
  12. Lockwood, Ben, 1997. "State-Contingent Inflation Contracts and Unemployment Persistence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 286-99, August.
  13. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  14. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  15. Glazer, Amihai, 1989. "Politics and the Choice of Durability," American Economic Review, American Economic Association, vol. 79(5), pages 1207-13, December.
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