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http://ssrn.com/abstract=331008
 
 

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Are Politicians Really Paid Like Bureaucrats?


Rafael Di Tella


Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)

Raymond J. Fisman


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

September 2002

NBER Working Paper No. w9165

Abstract:     
We provide the first empirical analysis of gubernatorial pay. Using US data for 1950-90 we document, contrary to widespread assumptions, substantial variation in the wages of politicians, both across states and over time. Gubernatorial wages respond to changes in state income per capita and taxes, after controlling for state and time fixed effects. The economic effects seem large: governors receive a 1 percent pay cut for each ten percent increase in per capita tax payments and a 4.5 percent increase in pay for each ten percent increase in income per capita in their states. There is strong evidence that the tax elasticity reflects a form of reward-for-performanc.' The evidence on the income elasticity of pay is less conclusive, but is suggestive of rent extraction' motives. Lastly, we find that democratic institutions seem to play an important role in shaping pay. For example, voter-initiatives and the presence of significant political opposition lead to large reductions in the income elasticity of pay, and to large increases (at least double) in the tax elasticities of pay, relative to the elasticities that are observed when these democratic institutions are weaker.

Number of Pages in PDF File: 44

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Date posted: October 6, 2002  

Suggested Citation

Di Tella, Rafael and Fisman, Raymond J., Are Politicians Really Paid Like Bureaucrats? (September 2002). NBER Working Paper No. w9165. Available at SSRN: http://ssrn.com/abstract=331008

Contact Information

Rafael Di Tella
Harvard Business School - Business, Government and the International Economy Unit ( email )
Cambridge, MA
United States
617-495-5048 (Phone)
617-496-5985 (Fax)
HOME PAGE: http://www.people.hbs.edu/rditella/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Raymond Fisman (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
(212) 854-5553 (Phone)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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