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Moneycracy

Author

Listed:
  • Alessandro Fedele

    (Free University of Bolzano‐Bozen, School of Economics and Management)

  • Pierpaolo Giannoccolo

    (Dipartimento di Scienze Economiche, Università di Bologna)

Abstract

How do wage and other financial benefits affect the set of candidates for political office? We answer the question by studying self-selection into politics of individuals with heterogeneous skills and heterogeneous motivations. Our predictions are in line with the efficiency wage results proposed by the extant literature when a benchmark model is considered with skills as the sole characteristic of individuals. Welfare is increasing in the politicians’ wage since the best, i.e., high-skilled, individuals are attracted to politics only if remuneration covers their high opportunity costs. Our findings are remarkably different when also motivation is taken into account. Welfare is not likely to be maximum when the politicians’ wage is maximum for individuals are attracted whose motivation is well fitted with the market rather than the public sector. Finally, we provide an overview of the labor market of politicians in some Western countries and suggest that the Italian case might be representative of our inefficiency wage mechanism, which we call moneycracy.

Suggested Citation

  • Alessandro Fedele & Pierpaolo Giannoccolo, 2013. "Moneycracy," BEMPS - Bozen Economics & Management Paper Series BEMPS07, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps07
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    File URL: https://repec.unibz.it/bemps07.pdf
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    • A. Fedele & P. Giannoccolo, 2013. "Moneycracy," Working Papers wp893, Dipartimento Scienze Economiche, Universita' di Bologna.

    References listed on IDEAS

    as
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    More about this item

    Keywords

    Keywords: Politicians’ remuneration; Skills; Motivation; Moneycracy;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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