Incentive Contracts for Politicians and Dual Democracy

We investigate whether the combination of incentive contracts for politicians and elections (dual democracy) can help to improve democratic election processes. We examine two types of incentives for politicians: Incentive contracts which make the remuneration of a politician dependent on his political performance and threshold incentive contracts which determine a minimum performance level that a politician has to reach in order to be allowed to run for reelection. In particular, we are concerned with the following issues:

• Can incentive contracts and elections motivate politicians to invest in policies that yield long-term benefits?
• Can incentive contracts help to improve the politicians' effort-allocation across tasks?
• Does the competition of politicians for incentive contracts and elections alleviate inefficient decision-making in politics?
• How can incentive contracts be designed for coalition governments?
• Can a combination of incentive contracts, elections and political information markets be used to generate incentives to invest in long-term policies whose outcomes are not verifiable?

We propose the introduction of a dual mechanism of incentive contracts for politicians and democratic elections in order to improve the quality of democratic decision-making.

Publications:

• Flexible Pensions for Politicians, Public Choice, 145(1-2), 2010, 103-124.
  (Hans Gersbach and Markus Müller)
• Power to Youth: Designing Democracy for Long-term Well-being, Mathematical Social Sciences, 58(2), 2009, 158-172.
  (Hans Gersbach and Tobias Kleinschmidt)
  Working Paper Version: available here
• Competition of Politicians for Wages and Office, Social Choice and Welfare, 33(1), 2009, 51-71.
  (Hans Gersbach)
  Working Paper Version: available here
• Incentive Contracts and Elections for Politicians with Multi-Task Problems, Journal of Economic Behavior and Organization, 68(2), 2008, 401-411.
  (Hans Gersbach and Verena Liessem)
  Working Paper Version: available here
• Reelection Thresholds in Politics, Social Choice and Welfare, 31(2), 2008, 233-255.
  (Hans Gersbach and Verena Liessem)
  Working Paper Version: available here
• Motivation of Politicians and Long-Term Policies, Public Choice, 132, 2007, 273-289.
  (Markus Müller)
  Working Paper Version: available here
• Competition of Politicians for Incentive Contracts and Elections, Public Choice, 121, 2004, 157-177.
  (Hans Gersbach)
  Working Paper Version: available here
• Incentive Contracts and Elections for Politicians and the Down-Up Problem, in M. Sertel and S. Koray (eds.): Advances in Economic Design, Springer, Berlin, 2003.
  (Hans Gersbach)
  Working Paper Version: available here

Working Papers:

• Tax Contracts and Elections
  (Hans Gersbach and Maik Schneider)
• Higher Vote Thresholds for Incumbents, Effort and Selection
  (Hans Gersbach)
• Government Debt Threshold Contracts
  (H. Gersbach)
• Tax Contracts and Government Formation
  (Hans Gersbach and Maik Schneider)
• Vote-Share Contracts and Learning-by-Doing
  (Markus Müller)
• Contractual Democracy
  (Hans Gersbach)
• Vote-share Contracts and Democracy
  (Hans Gersbach)
• Elections, Contracts and Markets
  (Hans Gersbach and Markus Müller)

Team Members: Hans Gersbach, Maik Schneider, Oriol Tejada

Cooperation Partner: Johannes Becker, Verena Liessem, Markus Müller