Do Higher Salaries Lead to Higher Performance? Evidence from State Politicians

Abstract

We study the impact of politician salary on electoral competitiveness and political performance using new data on U.S. state legislators and governors over the last sixty years. Higher salary is associated with statistically significant, but economically small, increases in electoral competitiveness and legislative productivity, the latter proxied with bill-passing and missed roll call votes. Salary has no effect on politician quality, corruption, or fiscal policy. To address the possible concern of salary changes being correlated with politicians' outside options, we implement a spatial discontinuity design using legislative district pairs straddling state borders, and find modest impacts of salary, as in the fixed effects and selection-on-observables designs. The impact of politician salary is weakest (i.e., totally absent) in states with strong political parties, suggesting that parties may reduce entry. Despite small impacts on performance, higher salary is significantly correlated with behavior on another margin, namely time-use; time-use data suggests that politicians in higher wage states spend greater time on fund-raising and on constituent services, but no more time on legislative activities. Our results lend caution to common claims that increasing politician salary would significantly increase the quality of U.S. state government.