Scandal, Protection, and Recovery in Political Cabinets

David Myatt, Torun Dewan, Department of Government and London School of Economics

No 237, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: Empirical evidence suggests that a Prime Minister can benefit from firing ministers who are involved in political scandals. We explore a model in which a minister`s exposure to scandals is positvely related to his policy activism, so that a Prime Minister may wish to protect him from resignation calls. We find that protection can sometimes work against the objective of encouraging activism: it makes a minister`s position more valuable to him and hence can encourage him to sit tight by moderating his activities. On the other hand, an exogenous increase in exposure to scandals may lead a minister to live for today by pursuing controversial policy innovations. The Prime Minister`s ability to protect ministers from resignation calls is limited by her short-term incentive to fire. She may, however, enhance her credibility by building a collective reputation with the wider membership of her cabinet; we show that heterogeneity of cabinet membership can play an important role.

Keywords: Ministerial Resignations; Reputation; Relational Contracts; Multi-Market Contract; Protection; Incentives (search for similar items in EconPapers)
JEL-codes: C70 D20 H10 (search for similar items in EconPapers)
Date: 2005-06-01
New Economics Papers: this item is included in nep-pbe and nep-pol
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