Salaries and Work Effort: An Analysis of the European Union Parliamentarians

Abstract

Before July 2009, salaries of the Members of the European Parliament (MEPs) were paid by their home country, and there were substantial salary differences between MEPs representing different countries. Starting in July 2009, salaries are pegged to 38.5% of a European Court judge's salary, paid by the European Union. This created an exogenous change in salaries, the magnitude and direction of which varied substantially. Using information on each MEP between 2004 and 2011, we show that an increase in salaries decreases attendance at plenary sessions and reduces the number of questions asked but it has no impact on other job-related activities.As recent research has emphasised the importance of political institutions and the quality of government on economic development (Dollar and Kraay, 2003;Rigobon and Rodrik, 2005;Aghion et al., 2007;Acemoglu and Dell, 2010), it has become increasingly important to investigate the determinants of the quality and performance of elected officials. Although some models predict that better compensation for political posts would motive higher quality individuals (e.g. those who are more educated) to run for office (Besley, 2004;Caselli and Morelli, 2004), others predict that higher compensation would attract low-quality candidates (Messner and Polborn, 2004;Mattozzi and Merlo, 2008). Ferraz and Finan (2009) analyse data from Brazil and find that higher salaries attract more educated individuals to run for political office. A similar finding is reported by Gagliarducci and Nannicini (2012) who analysed data on Italian municipal governments. While it is important to understand the determinants of the quality and competence of an elected body, it is equally important to analyse the relationship between the compensation of politicians and their performance while in office. Performance of public officials is difficult to measure. Besley (2004) uses data from the US and investigates the extent to which governor salaries increases congruence between state governors and the residents of the state. Gagliarducci and Nannicini (2012) find that municipality budgets in Italy are smaller when the mayors are paid more.In this article we analyse the change in job-related behaviour of the members of the European Union (EU) Parliament following an exogenous increase in their salaries. Each member of the EU Parliament receives a fixed salary, which is independent of the work effort and the attendance record of the parliamentarian. EU Parliament members also receive a per diem compensation for every parliamentary session they attend. This per diem compensation, which was €304 in 2011, is not intended to cover * Corresponding author: Naci Mocan, Department of Economics, Louisiana State University, 3039 Business Education Complex, Baton Rouge, LA 70803, USA. Email: mocan@lsu.edu.We thank Ana Ichim and Natalia Boliari for providing information on Romanian and Bulgarian elections respectively. Luiza Pogorelova and Deokrye Baek provided excellent research assistance. We thank Kaj Gittings, B€ ulent } Unel, ...

German MPs' Outside Jobs and Their Repercussions on Parliamentary Effort

“…The point estimates of the quadratic specification here imply that both the peak attendance rate and the maximum or oral contributions are reached at age 46. This confirms findings for the EU Parliament (Mocan and Altindag, 2013), where age also exhibits an inverse U-shaped effect on attendance rates.…”

“…The second vote is given to a party; and seats are allocated proportionally according to the vote shares achieved. Note that almost all candidates run in both tiers: While being associated to their "home" constituency, they also 7 An important exception are Mocan and Altindag (2013), who are interested in the work effort of members of the European Parliament follwing a deputy salary harmonization reform in 2009. However, their paper differs from mine as their main explanatory variable is not outside earnings, but remuneration for inner-parliamentary activity.…”

Do politicians shirk when reelection is certain? Evidence from the German parliament

“…and in the European Parliament. 10 For the European Parliament, Mocan and Altindag (2013) use a pay scheme harmonization reform in 2009 to investigate the effects of MPs' salaries on attendance behavior in parliament. They find that a salary increase reduces attendance.…”

Electoral cycles in MPs’ salaries: evidence from the German states

“…In the European parliament, by contrast, increased salaries yielded less experienced newly-elected politicians (Braendle 2015). Evidence on how salaries influenced efforts in the European parliament is mixed (Fisman et al 2013, Mocan and Altindag 2013, Braendle 2015. 4 In the German states, MPs decided annually on their own salaries, particularly in the 1980s, 1990s, and 2000s (currently, the salaries of MPs are coupled with employees' salaries 3 In the United Kingdom, elections influenced MPs' outside activities (Geys 2013).…”