Labor Supply of Politicians

Publikation: Working paperForskning

Using data on Members of the European Parliament (MEPs), we examine the impact of salaries on the composition and the behavior of legislators. Employing a differences-in-differences approach, we exploit the introduction of a law that equalized MEPs’ salaries which had previously differed by as much as a factor of ten. We analyze the data through the lens of a simple, empirically supported model: MEPs produce legislative output using human capital (proxied by tenure and college quality) and effort (proxied by voting partici-pation). Doubling an MEP’s salary increases the probability she runs for reelection by 23 percentage points; thus, higher salaries increase tenure. Higher salaries, however, lower the other dimension of human capital: doubling the salary decreases the fraction of MEPs who attended a top school by 15 percent. Salary has no discernible impact on effort. Overall, higher salaries do not substantially improve legislative output; we can reject the null that doubling salaries in-creases legislative output by more than a fifth of a standard deviation. However, higher salaries do induce more political competition: doubling MEPs’ salaries increases the logarithm of the number of parties that field a candidate by 41 percent of a standard deviation.
UdgiverNational Bureau of Economic Research
Antal sider45
StatusUdgivet - jan. 2012

ID: 50621686