Political Tenure, Term Limits and Corruption

Abstract

Political tenure (experience) is a double-edged sward: expediting government performance, while increasing political power with potentially harmful (corruption) ramifications. Within a voters-politician interaction framework, we unravel these two effects of political tenure on voters' welfare and examine how term limits affect these relations. We show that the key factors affecting the tenure-welfare relation are the learning curve of incumbents in conducting their regular task (public goods provision) and the learning curve of opportunistic incumbents in becoming effective embezzlers. We find that term limits increase the frequency of corruption incidents but reduce the expected cost per incident. The corruption cost is shown to depend on three factors of which only one is sensitive to term limits. Implications for policies aimed at reducing corruption are discussed.

Keywords: Democracy, reelection, signaling, term limits, corruption

JEL Classification: D72, H11