Incentive Contracts and Elections for Politicians with Multi-Task Problems

Gersbach, Hans; Liessem, Verena

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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 Research; 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

There 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: Suggested Citation

Gersbach, Hans and Liessem, Verena, Incentive Contracts and Elections for Politicians with Multi-Task Problems (October 2003). Available at SSRN: https://ssrn.com/abstract=471380