TY  - JOUR
AU  - Tella,Rafael Di
AU  - Fisman,Raymond
TI  - Are Politicians Really Paid Like Bureaucrats?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9165
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9165
L1  - http://www.nber.org/papers/w9165.pdf
N1  - Author contact info:
Rafael Di Tella
Harvard Business School
Soldiers Field Rd
Boston, MA 02163
Tel: 617/495-6000
E-Mail: rditella@hbs.edu

Raymond Fisman
School of Business
Columbia University
622 Uris Hall
3022 Broadway
New York, NY 10027
Tel: 212/854-9157
Fax: 212-316-9219
E-Mail: rf250@columbia.edu
AB  - We provide the first empirical analysis of gubernatorial pay. Using US data for 1950-90 we document, contrary to widespread assumptions, substantial variation in the wages of politicians, both across states and over time. Gubernatorial wages respond to changes in state income per capita and taxes, after controlling for state and time fixed effects. The economic effects seem large: governors receive a 1 percent pay cut for each ten percent increase in per capita tax payments and a 4.5 percent increase in pay for each ten percent increase in income per capita in their states. There is strong evidence that the tax elasticity reflects a form of  reward-for-performanc.' The evidence on the income elasticity of pay is less conclusive, but is suggestive of  rent extraction' motives. Lastly, we find that democratic institutions seem to play an important role in shaping pay. For example, voter-initiatives and the presence of significant political opposition lead to large reductions in the income elasticity of pay, and to large increases (at least double) in the tax elasticities of pay, relative to the elasticities that are observed when these democratic institutions are weaker.
ER  -