DP4261 Competition of Politicians for Wages and Office
|Publication Date:||February 2004|
|Keyword(s):||compensation, elections and wages, free riding, incentive contracts, politicians, underprovision|
|Programme Areas:||Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4261|
We examine a model in which two politicians compete for office and for wages. Their remunerations are either set by the public or are offered competitively by the candidates during campaigns. Our main finding shows that competitive wage offers by candidates lead to lower social welfare than remunerations pre-determined by the public, since less competent candidates are elected or wage costs and tax distortions are higher.