Unraveling short- and farsightedness in politics

Hans Gersbach and Oriana Ponta ()
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Oriana Ponta: CER-ETH – Center of Economic Research at ETH Zurich

Public Choice, 2017, vol. 170, issue 3, No 7, 289-321

Abstract: Abstract The absence of a deselection threat in incumbents’ last term in office can be negative or positive for the polity. Some politicians may reduce their efforts, while others may pursue beneficial long-term policies that may be unpopular in the short term. We propose a novel pension system that solves the effort problem while preserving the willingness to implement long-term policies. The idea is to give politicians the option to choose between a flexible and a fixed pension scheme. While in the fixed scheme, performance has no impact on the pension, the pension increases with short-term performance in the flexible scheme, using the vote share of the officeholder’s party in the next election as a performance indicator. Such a pension choice improves the well-being of citizens since officeholders are encouraged to invest in those activities that are beneficial for society. We analyze the properties and consequences of such a system. Finally, we extend the pension system with choice to non-last-term situations and derive a general welfare result.

Keywords: Elections; Last term; Incumbents; Pension schemes; Selection; Effort (search for similar items in EconPapers)
JEL-codes: D7 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Unraveling Short- and Farsightedness in Politics (2013)
Working Paper: Unraveling Short- and Farsightedness in Politics (2012)
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DOI: 10.1007/s11127-016-0396-6

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