Reward or Punishment? The Distribution of Life-Cycle Returns to Political Office

Dahlgaard, Jens Olav; Kristensen, Nicolai; Larsen, Frederik

doi:10.2139/ssrn.4114858

Cited by 1 publication

(6 citation statements)

References 37 publications

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“…Our results show that politicians on average witness a substantial increase in income when they enter a political office (compared to the pre ‐office period). This income boost ranges between 7% and 17%, which is comparable to recent findings in other Western democracies (Berg, 2020a, 2020b; Cirone et al, 2021; Dahlgaard et al, 2022; Kotakorpi et al, 2017). Moving to the post‐office period, we find that politicians on average experience a drop in income of approximately 30%–40% upon leaving office (compared to the in ‐office period).…”

Section: Introductionsupporting

confidence: 88%

“…More recent work also shows that MPs in several European countries earn very well during their term(s) in office. Berg (2020a), Cirone et al (2021) and Dahlgaard et al (2022) show that Swedish, Norwegian and Danish MPs, respectively, on average witness a very considerable income boost when first elected. Peichl et al (2013) and Fahey (2018) present similar findings for German MPs and US state legislators, respectively.…”

Section: Previous Literature and Theoretical Expectationsmentioning

confidence: 99%

“…Still, in some extensions, we also exploit information on marginally never‐elected candidates . These can credibly be argued to offer a sensible control group of individuals never ‘treated’ with holding political office (Berg, 2020a; Cirone et al, 2021; Dahlgaard et al, 2022). This is based on the notion that ‘conditional on agents' actions and characteristics as of election day, the winner of a closely contested election would be determined as if by the flip of a coin if there exists a random chance element in elections’ (Fiva, Geys, et al, 2021, p. 602).…”

Section: Institutional Setting and Datamentioning

confidence: 99%

“…Identifying causal effects of such events is far from straightforward since entry and exit from political office may be endogenously determined. Previous work attempts to address this concern via both difference‐in‐differences (DiD; Berg, 2020a; Cirone et al, 2021; Dahlgaard et al, 2022) and regression discontinuity designs (RD; Berg, 2020b; Cirone et al, 2021; Eggers & Hainmueller, 2009; Fisman et al, 2014; Kotakorpi et al, 2017; Querubin & Snyder, 2009). Both approaches have their strengths and limitations.…”

Section: Research Design: Event‐study Analysismentioning

confidence: 99%

“…Even so, it remains a hotly debated issue to this day. Most empirical studies thus far have focused on the short‐ and/or long‐term returns to entering or retaining political office (Berg, 2020a; Cirone et al, 2021; Dahlgaard et al, 2022; Diermeier et al, 2005; Eggers & Hainmueller, 2009; Fahey, 2018; Fisman et al, 2014; Peichl et al, 2013). Scholarship on what happens when politicians leave office is much less developed.…”

Section: Introductionmentioning

confidence: 99%

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A post‐politics earnings penalty? Evidence from politicians' lifetime income trajectories (1970–2019)

Geys,

Sørensen

2023

Kyklos

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Politicians are commonly believed to gain financially from holding and/or having held office. We argue that there may often also be economic downsides to pursuing a political career and investigate whether and when politicians can (not) capitalize on their political experience. We thereby study both entry into and exit from political office and directly compare the returns to politics across government levels and types of politicians. Empirically, we build on detailed information from Norwegian administrative register data over the period 1970–2019 to study individual‐level income developments before, during and after a political career at the national and local levels (covering nearly 22,000 individuals and 700,000 person‐years). Using an event‐study methodology, we show that politicians on average witness a significant income boost during their time in office. In sharp contrast, leaving political office is on average associated with a substantial drop in income, which generally outweighs the income gain from entry into office. These findings suggest that most politicians face a net present value loss from holding office.

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