Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance

60 Pages Posted: 20 Apr 2009 Last revised: 25 Sep 2010

See all articles by Claudio Ferraz

Claudio Ferraz

University of California, Berkeley - Department of Agricultural & Resource Economics; Institute of Applied Economic Research (IPEA)

Frederico Finan

University of California, Berkeley - Department of Economics; IZA Institute of Labor Economics

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Date Written: April 2009

Abstract

Recent studies have emphasized the importance of the quality of politicians for good government and consequently economic performance. But if the quality of leadership matters, then understanding what motivates individuals to become politicians and perform competently in office becomes a central question. In this paper, we examine whether higher wages attract better quality politicians and improve political performance using exogenous variation in the salaries of local legislators across Brazil's municipal governments. The analysis exploits discontinuities in wages across municipalities induced by a constitutional amendment defining caps on the salary of local legislatures according to municipal population. Our main findings show that higher wages increases political competition and improves the quality of legislators, as measured by education, type of previous profession, and political experience in office. In addition to this positive selection, we find that wages also affect politicians' performance, which is consistent with a behavioral response to a higher value of holding office.

Suggested Citation

Ferraz, Claudio and Finan, Frederico, Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance (April 2009). NBER Working Paper No. w14906, Available at SSRN: https://ssrn.com/abstract=1391853

Claudio Ferraz

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

Institute of Applied Economic Research (IPEA) ( email )

Av. Presidente Antonio Carlos 51
16 andar, Castelo
RJ 20020-010 Rio de Janeiro
Brazil
+55 21 3804-8000 (Phone)
+55 21 2240-1920 (Fax)

Frederico Finan

University of California, Berkeley - Department of Economics ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

IZA Institute of Labor Economics

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

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