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Outside income and moral hazard : the elusive quest for good politicians

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  • Gagliarducci, Stefano
  • Nannicini, Tommaso
  • Naticchioni, Paolo
Abstract
In most modern democracies elected officials can work in the private sector while appointed in parliament. We show that when the political and market sectors are not mutually exclusive, a trade-off arises between the quality of elected officials and the effort they exert in political life. If high-ability citizens can keep earning money outside of parliament, they will be more likely to run for election; for the same reason, they will also be more likely to shirk once elected. These predictions are confronted with a unique dataset about members of the Italian Parliament from 1996 to 2006. The empirical evidence shows that bad but dedicated politicians come along with good but not fully committed politicians. There is in fact a non-negligible fraction of citizens with remarkably high pre-election income who are appointed in parliament. These citizens are those who gain relatively more from being elected in terms of outside income. Conversely, they are less committed to the parliamentary activity in many respects, like voting attendance and bills sponsorship.

Suggested Citation

  • Gagliarducci, Stefano & Nannicini, Tommaso & Naticchioni, Paolo, 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.
    • Handle: RePEc:cte:werepe:we073218
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    Cited by:

    1. Stefano Gagliarducci & Tommaso Nannicini & Paolo Naticchioni, 2011. "Electoral Rules and Politicians' Behavior: A Micro Test," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 144-174, August.
    2. Thomas Braendle & Alois Stutzer, 2010. "Public servants in parliament: theory and evidence on its determinants in Germany," Public Choice, Springer, vol. 145(1), pages 223-252, October.
    3. Massimiliano Landi & Antonio Merlo & Vincenzo Galasso & Andrea Mattozzi, 2008. "The Labor Market of Italian Politicians," Labor Economics Working Papers 22461, East Asian Bureau of Economic Research.
    4. Stefano Gagliarducci & Tommaso Nannicini, 2013. "Do Better Paid Politicians Perform Better? Disentangling Incentives From Selection," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 369-398, April.
    5. Gagliarducci, Stefano & Nannicini, Tommaso & Naticchioni, Paolo, 2010. "Moonlighting politicians," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 688-699, October.
    6. Emanuele Bracco & Francesco Porcelli & Michela Redoano, 2013. "Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy," CESifo Working Paper Series 4167, CESifo.
    7. 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).
    8. Kotakorpi, Kaisa & Poutvaara, Panu, 2011. "Pay for politicians and candidate selection: An empirical analysis," Journal of Public Economics, Elsevier, vol. 95(7), pages 877-885.
    9. Galasso, Vincenzo & Nannicini, Tommaso, 2011. "Competing on Good Politicians," American Political Science Review, Cambridge University Press, vol. 105(1), pages 79-99, February.
    10. Eggers, Andy & Hainmueller, Jens, 2008. "MPs for Sale? Estimating Returns to Office in Post-War British Politics," MPRA Paper 7892, University Library of Munich, Germany.
    11. Antonio Merlo & Vincenzo Galasso & Massimiliano Landi & Andrea Mattozzi, 2008. "the Labor Market of Italian Politicians, Second Version," PIER Working Paper Archive 09-024, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 May 2009.
    12. Thomas Braendle & Alois Stutzer, 2008. "Bureaucrats in Parliament: Theory and Evidence on Its Determinants in Germany," CREMA Working Paper Series 2008-23, Center for Research in Economics, Management and the Arts (CREMA).
    13. Becker, Johannes & Peichl, Andreas & Rincke, Johannes, 2008. "Politicians' Outside Earnings and Political Competition," IZA Discussion Papers 3902, Institute of Labor Economics (IZA).
    14. Johannes Becker & Andreas Peichl & Johannes Rincke, 2009. "Politicians’ outside earnings and electoral competition," Public Choice, Springer, vol. 140(3), pages 379-394, September.
    15. Wyss, Simone, 2008. "Ist die relative Schlechterstellung niedrigqualifizierter Arbeitskräfte Mythos oder Realität? - Eine Analyse der Schweizer Disparität von Lohn- und Arbeitslosenquote nach Qualifikation," Working papers 2008/06, Faculty of Business and Economics - University of Basel.

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    More about this item

    Keywords

    Politicians;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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