The Politicians' Wage Gap: Insights from German Members of Parliament

Andreas Peichl, Nico Pestel and Sebastian Siegloch

No 5520, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using a unique dataset of German members of parliament with information on total earnings including outside income, this paper analyzes the politicians’ wage gap (PWG). After controlling for observable characteristics as well as accounting for selection into politics, we find a positive PWG which is statistically and economically significant. It amounts to 40-60% compared to citizens with an executive position. Hence, we show that the widely held claim that politicians would earn more in the private sector is not confirmed by our data. Our findings are robust with respect to potential unobserved confounders. We further show that the PWG exceeds campaigning costs and cannot be justified by extraordinary workload. Hence, our results suggest that part of the PWG can be interpreted as rent extraction. This calls for a reform of the regulation of outside earnings, which account for a sizeable share of the wage premium.

Keywords: political rents; citizen-candidate model; descriptive representation; politicians' wage gap; outside earnings (search for similar items in EconPapers)
JEL-codes: D72 H11 H83 J31 J45 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-02
New Economics Papers: this item is included in nep-cdm, nep-lab and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - revised version published in: Public Choice, 2013, 156(3-4), 653-676

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Related works:
Journal Article: The politicians’ wage gap: insights from German members of parliament (2013)
Working Paper: The Politicians' Wage Gap: Insights from German Members of Parliament (2011)
Working Paper: The politicians’ wage gap: insights from German members of parliament (2011)
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