Incentive Contracts and Elections for Politicians with Multi-Task Problems

32 Pages Posted: 20 Nov 2003

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Verena Liessem

Heidelberg University - Faculty of Economics and Social Studies

Multiple version iconThere are 2 versions of this paper

Date Written: October 2003

Abstract

We consider a model with a politician facing a multi-task problem while in office. The re-election mechanism distorts the allocation of effort in favour of tasks whose outcomes can be measured more precisely than others. We show that a combination of elections and incentive contracts can alleviate this inefficiency. The incentive contract does not require information about the performance of the politician and is self-financing across terms.

Keywords: Elections, incentive contracts, multi-task problems

JEL Classification: D72, D82

Suggested Citation

Gersbach, Hans and Liessem, Verena, Incentive Contracts and Elections for Politicians with Multi-Task Problems (October 2003). CEPR Discussion Paper No. 4075. Available at SSRN: https://ssrn.com/abstract=471380

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

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

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Verena Liessem

Heidelberg University - Faculty of Economics and Social Studies ( email )

Grabengasse 14
Heidelberg, D-69117
Germany
+49-6221-543172 (Phone)
+49-6221-543578 (Fax)

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