Accountability and Grand Corruption

Abstract

We propose a model of political careers and electoral accountability, in an environment in which politicians may take bribes at different stages of their careers, and in which politicians' actions are only imperfectly observed by voters. We show that the expectation of promotion to higher office may motivate some politicians to behave worse at the latest stages of their careers, thus setting off a trade-off between providing incentives for good behavior at lower office and selecting better politicians for higher office. We also show that the optimal design of rewards for higher office has a simple bang-bang structure – optimal rewards focus either on stamping out corruption at lower office, or on improving selection at the higher office. If rewards are set optimally, a more intense competition for higher office benefits voters, but better quality of information about bribe-taking at lower levels does not unambiguously benefit voters.