DP4075 Incentive Contracts and Elections for Politicians with Multi-Task Problems
Author(s): | Hans Gersbach, Verena Liessem |
Publication Date: | October 2003 |
Keyword(s): | elections, incentive contracts, multi-task problems |
JEL(s): | D72, D82 |
Programme Areas: | Public Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=4075 |
We consider a model with a politician facing a multi-task problem while in office. The re-election mechanism distorts the allocation of effort in favour of tasks whose outcomes can be measured more precisely than others. We show that a combination of elections and incentive contracts can alleviate this inefficiency. The incentive contract does not require information about the performance of the politician and is self-financing across terms.