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Scandal, Protection, and Recovery in Political Cabinets

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  • David P. Myatt
  • Torun Dewan

Abstract

Empirical evidence suggests that a Prime Minister can benefit from firing ministers who are involved in political scandals. We explore a model in which a minister`s exposure to scandals is positvely related to his policy activism, so that a Prime Minister may wish to protect him from resignation calls. We find that protection can sometimes work against the objective of encouraging activism: it makes a minister`s position more valuable to him and hence can encourage him to sit tight by moderating his activities. On the other hand, an exogenous increase in exposure to scandals may lead a minister to live for today by pursuing controversial policy innovations. The Prime Minister`s ability to protect ministers from resignation calls is limited by her short-term incentive to fire. She may, however, enhance her credibility by building a collective reputation with the wider membership of her cabinet; we show that heterogeneity of cabinet membership can play an important role.

Suggested Citation

  • David P. Myatt & Torun Dewan, 2005. "Scandal, Protection, and Recovery in Political Cabinets," Economics Series Working Papers 237, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:237
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper237.pdf
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    References listed on IDEAS

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    5. MacLeod, W Bentley & Malcomson, James M, 1988. "Reputation and Hierarchy in Dynamic Models of Employment," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 832-854, August.
    6. Ernesto Dal Bo & Rafael Di Tella, 2003. "Capture by Threat," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 1123-1152, October.
    7. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Ministerial Resignations; Reputation; Relational Contracts; Multi-Market Contract; Protection; Incentives;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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