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Publications
  • October 2004
  • Article
  • Journal of Law & Economics

Are Politicians Really Paid Like Bureaucrats?

By: Rafael Di Tella and Raymond Fisman
  • Format:Print
  • | Pages:38
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Abstract

We provide the first empirical analysis of gubernatorial pay. Using U.S. data for 1950-90, we document substantial variation in the wages of politicians, both across states and overtime. Gubernatorial wages respond to changes in state income per capita and taxes. We estimate that governors receive a 1 percent pay cut fo reach 10 percent increase in per capita tax payments and a 4.5 percent increase in pay for each 10 percent increase in income per capita in their states. There is evidence that the taxelasticity reflects a form of “reward for performance.” The evidence for the income elasticity of pay is less conclusive but is suggestive of “rentextraction” motives. Finally,we find that democratic institutions play an important role in shaping pay. For example,voter initiatives and the presence of political opposition significantly reduce the income elasticity of pay and increase taxelasticities of pay.

Keywords

Government and Politics; Compensation and Benefits

Citation

Di Tella, Rafael, and Raymond Fisman. "Are Politicians Really Paid Like Bureaucrats?" Journal of Law & Economics 47, no. 2 (October 2004): 477–514.
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About The Author

Rafael M. Di Tella

Business, Government and the International Economy
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