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Do Wages Affect Politician Performance? A Regression Discontinuity Approach for Municipalities

Daan van der Linde
Utrecht University
Daan van der Linde
Utrecht University
Swantje Falcke
Utrecht University
Ian Koetsier
Utrecht University

Abstract

This paper empirically assesses politician quality, focusing on the intermediary effect of remuneration on performance. While theory does not provide a straightforward answer on this relationship, recent studies suggest higher remuneration attracts higher quality candidates, positively affecting representation. Discontinuous changes in the wages of politicians at the municipal level in the Netherlands allow us to study this question in a quasi-experimental framework for the period 2005-2013. We apply a regression discontinuity design and find a strong effect of wage level on municipality net debt, total tax revenue and total expenditure, while deficits seem unaffected. This entails higher income attracts politicians that invest more, proven by our finding that investments in infrastructure among other fixed assets are valued higher in municipalities with higher paid politicians. We interpret this as higher performance, as quality of life indicators show higher valuation of public space in municipalities where politician’s wages are set higher.