Paying Politicians: Not Too Little, Not Too Much

Abstract

How does pay affect the quality of politicians? This paper addresses the question by considering a three‐period citizen candidate model where potential candidates vary in skills and in public service motivation. First, potential candidates observe the level of pay in politics and simultaneously decide whether or not to run for office. Second, an election takes place and only one candidate is elected. Finally, the successful candidate provides a public good, while the others work in the market sector. In a benchmark model where potential candidates differ only in skills, the quality of the elected politician is shown to increase with pay. If public service motivation is also considered, then an inverted U‐shaped relationship is found.