Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171601
Authors: 
Gersbach, Hans
Ponta, Oriana
Year of Publication: 
2012
Series/Report no.: 
Economics Working Paper Series 12/158
Abstract: 
The absence of the deselection threat in incumbents’ last term in office can be negative or positive for society. Some politicians may reduce their efforts, while others may pursue beneficial long-term policies that may be unpopular in the short term. We propose a novel pension system that solves the effort problem while preserving willingness to implement long-term policies. The idea is to give politicians the option to choose between a flexible pension scheme and a fixed pension scheme. In a flexible pension scheme, the pension increases with short term performance as measured by the vote share of the officeholder’s party in the next election. This system increases social welfare by letting officeholders self-select into those activities that most benefit society. We analyze the properties and consequences of such a system and assess its robustness. Finally, we extend the pension system with choice to non-last-term situations and derive a general welfare result.
Subjects: 
elections
political contracts
vote-share thresholds
incumbents
selection
effort
JEL: 
D7
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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