Working Paper: NBER ID: w14906
Authors: Claudio Ferraz; Frederico Finan
Abstract: Recent studies have emphasized the importance of the quality of politicians for good government and consequently economic performance. But if the quality of leadership matters, then understanding what motivates individuals to become politicians and perform competently in office becomes a central question. In this paper, we examine whether higher wages attract better quality politicians and improve political performance using exogenous variation in the salaries of local legislators across Brazil's municipal governments. The analysis exploits discontinuities in wages across municipalities induced by a constitutional amendment defining caps on the salary of local legislatures according to municipal population. Our main findings show that higher wages increases political competition and improves the quality of legislators, as measured by education, type of previous profession, and political experience in office. In addition to this positive selection, we find that wages also affect politicians' performance, which is consistent with a behavioral response to a higher value of holding office.
Keywords: monetary incentives; political performance; political selection
JEL Codes: D72; D78; J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher salaries (J31) | Increase political competition (D72) |
| Higher salaries (J31) | Attract more educated candidates (J24) |
| Higher salaries (J31) | Improve legislative performance (D72) |
| Higher salaries (J31) | Increase number of approved bills (D72) |
| Higher salaries (J31) | Establish functioning legislative commissions (D72) |
| Higher salaries (J31) | No significant impact on public goods provision (H49) |