Better Pay Doesn’t Buy You Better Politicians

Raymond Fisman, Nikolaj Harmon, Emir Kamenica, and Inger Munk report on the impact of salary changes on the labor supply of Members of the European Parliament:

We examine the labor supply of politicians using data on Members of the European Parliament (MEPs). We exploit the introduction of a law that equalized MEPs’ salaries, which had previously differed by as much as a factor of ten. Doubling an MEP’s salary increases the probability of running for reelection by 23 percentage points and increases the logarithm of the number of parties that field a candidate by 29 percent of a standard deviation. A salary increase has no discernible impact on absenteeism or shirking from legislative sessions; in contrast, non-pecuniary motives, proxied by home-country corruption, substantially impact the intensive margin of labor supply. Finally, an increase in salary lowers the quality of elected MEPs, measured by the selectivity of their undergraduate institutions.

It’s a very interesting subject that I’m not aware of much study on. The European Parliament is a pretty unusual legislative body so I wouldn’t assume that these results generalize to anywhere but it would be good to see more research of this kind of issue. Quality of governance is a huge issue and it’s well worth investing extra salary dollars in order to get it, but that’s only the case if higher pay really does get you higher quality.