Outside Income as a Signal: Evidence from Politicians and Voters

Carina Neisser and Wehrhöfer, Nils
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Wehrhöfer, Nils: Bundesbank

No 18576, IZA Discussion Papers from IZA Network @ LISER

Abstract: We study how public disclosure of politicians’ outside income affects their behavior. We exploit a disclosure reform targeting German federal MPs and tax-return data in a difference-in-differences setup using unaffected state MPs as controls. MPs increase their outside income by 24%, driven by likely right-leaning MPs. A representative survey experiment uncovers that right-leaning voters interpret outside income as a signal of competence and hard work, while left-leaning voters associate it with weaker representation. Consistent with this, we show that newspapers cover right-leaning MPs’ outside activities more favorably. Our findings suggest that politicians strategically use public disclosure as a signaling tool.

Keywords: tax data; outside income; politicians; income disclosure (search for similar items in EconPapers)
JEL-codes: D72 D83 J45 (search for similar items in EconPapers)
Date: 2026-04
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