Politicians’ outside earnings and electoral competition

Johannes Becker, Andreas Peichl, Johannes Rincke

FiFo / March 2008 / Discussion Paper, FiFo

Abstract
This paper deals with the impact of electoral competition on politicians’outside earnings. We
propose a simple theoretical model with politicians facing a tradeo¤ between allocating their
time to political e¤ort or to an alternative use generating outside earnings. The model has
a testable implication stating that the amount of time spent on outside work is negatively
related to the degree of electoral competition. We test this implication using a new dataset on
outside earnings of members of the German federal assembly. Taking into account the potential
endogeneity of measures of political competition that depend on past election outcomes, we …nd
that politicians facing low competition have substantially higher outside earnings.