Working Paper: CEPR ID: DP4075
Authors: Hans Gersbach; Verena Liessem
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; multitask problems
JEL Codes: D72; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reelection mechanism (D72) | distortion in politicians' effort allocation (D72) |
| distortion in politicians' effort allocation (D72) | favoring measurable tasks (C90) |
| incentive contracts + elections (D72) | mitigate distortions (H31) |