Motivation of Politicians and Long-Term Policies

Abstract

We explore the role of the motivation of politicians in democracies when long-term policies are socially desirable. Politicians receive utility from holding office and from the success of their projects. We refer to the two extreme types of politicians as populists and policy success-seekers. One result of our analysis is that inefficiencies in the political process are smaller when a politician is of the populist type. When politicians can offer incentive contracts that become effective upon reelection, the combination of contracts and elections can solve the problem of inefficient decision-making in politics. The amount of money necessary to induce the incumbent to undertake the socially optimal project decreases with the degree of populism he displays.

Keywords: elections, incentive contracts, democracy

JEL Classification: D72, D82