Outside Income and Moral Hazard: The Elusive Quest for Good Politicians

45 Pages Posted: 23 May 2008

See all articles by Stefano Gagliarducci

Stefano Gagliarducci

University of Rome, Tor Vergata - Faculty of Economics; Einaudi Institute for Economics and Finance (EIEF); IZA Institute of Labor Economics

Tommaso Nannicini

Bocconi University - Department of Economics; IZA Institute of Labor Economics

Paolo Naticchioni

University of Rome I; University of Cassino

Abstract

In most modern democracies elected officials can work in the private sector while appointed in parliament. We show that when the political and market sectors are not mutually exclusive, a trade-off arises between the quality of elected officials and the effort they exert in political life. If high-ability citizens can keep earning money outside of parliament, they will be more likely to run for election; for the same reason, they will also be more likely to shirk once elected. These predictions are confronted with a unique dataset about members of the Italian Parliament from 1996 to 2006. The empirical evidence shows that bad but dedicated politicians come along with good but not fully committed politicians. There is in fact a non-negligible fraction of citizens with remarkably high pre-election income who are appointed in parliament. These citizens are those who gain relatively more from being elected in terms of outside income. Conversely, they are less committed to the parliamentary activity in many respects, like voting attendance and bills sponsorship.

Keywords: politicians, moral hazard, adverse selection, absenteeism, outside income

JEL Classification: D72, J45, P16

Suggested Citation

Gagliarducci, Stefano and Nannicini, Tommaso and Naticchioni, Paolo, Outside Income and Moral Hazard: The Elusive Quest for Good Politicians. , Vol. , pp. -, . Available at SSRN: https://ssrn.com/abstract=1136457 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Stefano Gagliarducci (Contact Author)

University of Rome, Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

HOME PAGE: http://https://sites.google.com/site/stefanogagliarducci/

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tommaso Nannicini

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Paolo Naticchioni

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

University of Cassino ( email )

Cassino
Italy

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