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|
|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.