IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Do Better Paid Politicians Perform Better? Disentangling Incentives from Selection

  • Stefano Gagliarducci
  • Tommaso Nannicini

The wage paid to elected officials affects both the choice of citizens to run for office and the performance of those who are appointed. On the one hand, if skilled individuals shy away from politics because of higher opportunities in the private sector, an increase in politicians’ pay may change their mind. On the other hand, if the reelection prospects of incumbents depend on their in-office deeds, a higher wage may foster performance. We use data on all Italian municipalities from 1993 to 2007 to test these hypotheses in a quasi-experimental framework. In Italy, the wage of the mayor depends on population size and sharply increases at nine thresholds. We apply a regression discontinuity design to two thresholds that uniquely identify a wage increase (1,000 and 5,000 inhabitants) to control for unobservable town characteristics. Exploiting the existence of a two-term limit, we further disentangle the composition from the incentive component of the impact of the wage on performance. The empirical results show that a higher wage attracts more educated and high-skilled candidates, and that better paid politicians lessen the government machinery by reducing per-capita taxes, tariffs, and current expenditure, while leaving investments unchanged. Importantly, most of the performance effect is driven by the selection of better candidates, rather than the incentive to be reelected.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://ftp.igier.uni-bocconi.it/wp/2008/346.pdf
Download Restriction: no

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 346.

as
in new window

Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:igi:igierp:346
Contact details of provider: Postal:
via Rontgen, 1 - 20136 Milano (Italy)

Phone: 0039-02-58363301
Fax: 0039-02-58363302
Web page: http://www.igier.unibocconi.it/

Order Information: Web: http://www.igier.unibocconi.it/en/papers/index.htm Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Caselli, Francesco & Morelli, Massimo, 2000. "Bad Politicians," CEPR Discussion Papers 2402, C.E.P.R. Discussion Papers.
  2. Fernanda Brollo & Tommaso Nannicini & Roberto Perotti & Guido Tabellini, 2013. "The Political Resource Curse," American Economic Review, American Economic Association, vol. 103(5), pages 1759-96, August.
  3. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  4. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
  5. Stefano Gagliarducci & Tommaso Nannicini, 2010. "Do Better Paid Politicians Perform Better? Disentangling Incentives from Selection," CEIS Research Paper 162, Tor Vergata University, CEIS, revised 28 May 2010.
  6. Daniel Diermeier & Michael Keane & Antonio Merlo, 2002. "A Political Economy Model of Congressional Careers," PIER Working Paper Archive 04-037, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Sep 2004.
  7. Alberto F. Alesina & Paola Giuliano, 2009. "Preferences for Redistribution," NBER Working Papers 14825, National Bureau of Economic Research, Inc.
  8. John List & Daniel Sturm, 2004. "How Elections Matter: Theory and Evidence from Environmental Policy," Natural Field Experiments 00482, The Field Experiments Website.
  9. Jens Ludwig & Douglas L. Miller, 2005. "Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design," NBER Working Papers 11702, National Bureau of Economic Research, Inc.
  10. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Temi di discussione (Economic working papers) 350, Bank of Italy, Economic Research and International Relations Area.
  11. Timothy Besley & Anne Case, 1993. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," NBER Working Papers 4575, National Bureau of Economic Research, Inc.
  12. Ferraz, Claudio & Finan, Frederico S., 2007. "Electoral Accountability and Corruption in Local Governments: Evidence from Audit Reports," IZA Discussion Papers 2843, Institute for the Study of Labor (IZA).
  13. Timothy Besley, 2004. "Joseph Schumpeter Lecture: Paying Politicians: Theory and Evidence," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 193-215, 04/05.
  14. Timothy Besley, 2005. "Political Selection," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 43-60, Summer.
  15. Michael P. Keane & Antonio Merlo, 2007. "Money, Political Ambition, and the Career Decisions of Politicians," PIER Working Paper Archive 07-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  16. Naticchioni, Paolo & Nannicini, Tommaso & Gagliarducci, Stefano, 2007. "Outside income and moral hazard : the elusive quest for good politicians," UC3M Working papers. Economics we073218, Universidad Carlos III de Madrid. Departamento de Economía.
  17. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
  18. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2008. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," CEIS Research Paper 115, Tor Vergata University, CEIS, revised 14 Jul 2008.
  19. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  20. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
  21. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
  22. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September.
  23. Andrea Mattozzi & Antonio Merlo, 2007. "Political Careers or Career Politicians?," NBER Working Papers 12921, National Bureau of Economic Research, Inc.
  24. Chamon, Marcos & de Mello, João M. P. & Firpo, Sergio, 2009. "Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities," IZA Discussion Papers 4658, Institute for the Study of Labor (IZA).
  25. Adi Brender & Allan Drazen, 2008. "How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries," American Economic Review, American Economic Association, vol. 98(5), pages 2203-20, December.
  26. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  27. Matthias Messner & Mattias Polborn, 2003. "Paying Politicians," Working Papers 246, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  28. H. Erler, 2007. "Legislative term limits and state spending," Public Choice, Springer, vol. 133(3), pages 479-494, December.
  29. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1301-1338.
  30. Massimo Bordignon & Guido Tabellini, 2008. "Moderating Political Extremism: Single vs. Dual Ballot Elections," Levine's Working Paper Archive 122247000000002102, David K. Levine.
  31. Frederico Finan & Claudio Ferraz, 2009. "Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance," Working Papers id:1889, eSocialSciences.
  32. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Bureaucratic corruption and the rate of temptation: do wages in the civil service affect corruption, and by how much?," Journal of Development Economics, Elsevier, vol. 65(2), pages 307-331, August.
  33. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  34. Chamon, Marcos & Mello, João Manoel Pinho de & Firpo, Sergio Pinheiro, 2010. "Electoral rules, political competition and fiscal spending: regression discontinuity evidence from brazilian municipalities," Textos para discussão 208, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  35. Di Tella, Rafael & Fisman, Raymond, 2004. "Are Politicians Really Paid Like Bureaucrats?," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 477-513, October.
  36. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February.
  37. Pettersson-Lidbom, Per, 2012. "Does the size of the legislature affect the size of government? Evidence from two natural experiments," Journal of Public Economics, Elsevier, vol. 96(3), pages 269-278.
  38. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:igi:igierp:346. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.