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Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance

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  • Ferraz, Claudio

    (Pontifical Catholic University of Rio de Janeiro (PUC-Rio))

  • Finan, Frederico S.

    (University of California, Berkeley)

Abstract

Recent studies have emphasized the importance of the quality of politicians for good government and consequently economic performance. But if the quality of leadership matters, then understanding what motivates individuals to become politicians and perform competently in office becomes a central question. In this paper, we examine whether higher wages attract better quality politicians and improve political performance using exogenous variation in the salaries’ of local legislators across Brazil’s municipal governments. The analysis exploits discontinuities in wages across municipalities induced by a constitutional amendment defining caps on the salary of local legislatures according to municipal population. Our main findings show that increases in salaries not only attracts more candidates, but more educated ones. Elected officials are in turn more educated and stay in office longer. Higher salaries also increase legislative productivity as measured by the number of bills submitted and approved, and the provision of public goods.

Suggested Citation

  • Ferraz, Claudio & Finan, Frederico S., 2008. "Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance," IZA Discussion Papers 3411, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp3411
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    More about this item

    Keywords

    politician salary; quality; political agency;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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