Do Higher Salaries Lead to Higher Performance? Evidence from State Politicians

59 Pages Posted: 26 Oct 2013

See all articles by Mitchell Hoffman

Mitchell Hoffman

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Elizabeth Lyons

University of California, San Diego (UCSD)

Date Written: October 23, 2013

Abstract

We study the impact of politician salary on electoral competitiveness and political performance using new data on U.S. state legislators and governors over the last sixty years. Higher salary is associated with statistically significant, but economically small, increases in electoral competitiveness and legislative productivity, the latter proxied with bill-passing and missed roll call votes. Salary has no effect on politician quality, corruption, or fiscal policy. To address the possible concern of salary changes being correlated with politicians' outside options, we implement a spatial discontinuity design using legislative district pairs straddling state borders, and find modest impacts of salary, as in the fixed effects and selection-on-observables designs. The impact of politician salary is weakest (i.e., totally absent) in states with strong political parties, suggesting that parties may reduce entry. Despite small impacts on performance, higher salary is significantly correlated with behavior on another margin, namely time-use; time-use data suggests that politicians in higher wage states spend greater time on fund-raising and on constituent services, but no more time on legislative activities. Our results lend caution to common claims that increasing politician salary would significantly increase the quality of U.S. state government.

Keywords: Politician salary; Productivity; Moral hazard; Political parties

JEL Classification: D72, D78, M52, J33

Suggested Citation

Hoffman, Mitchell and Lyons, Elizabeth, Do Higher Salaries Lead to Higher Performance? Evidence from State Politicians (October 23, 2013). Rotman School of Management Working Paper No. 2345085. Available at SSRN: https://ssrn.com/abstract=2345085 or http://dx.doi.org/10.2139/ssrn.2345085

Mitchell Hoffman (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Elizabeth Lyons

University of California, San Diego (UCSD) ( email )

9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States

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