Returns to Office in National and Local Politics: A Bootstrap Method and Evidence from Finland

: Kaisa Kotakorpi, Panu Poutvaara, Marko Terviö

Publisher: Oxford University Press

: 2017

: Journal of Law, Economics, and Organization

: JOURNAL OF LAW ECONOMICS & ORGANIZATION

: J LAW ECON ORGAN

: 33

: 3

: 413

: 442

: 30

: 8756-6222

: 1465-7341

DOI: https://doi.org/10.1093/jleo/ewx010

We estimate the private returns to being elected to parliament or to a municipal council using a regression discontinuity (RD) design. We first present a bootstrap method for measuring the closeness of elections, which can be applied to any electoral system. We then apply the method to perform a RD estimation in Finland, where seats are assigned according to a proportional open-list system. Becoming a member of parliament increases annual earnings initially by about (sic)20,000, and getting elected to a municipal council by about (sic)1000. Subsequent earnings dynamics reveal that the returns to parliamentarians accrue mainly during the time in office, while the effect on later earnings is small. We also find a relatively weak individual incumbency advantage of 18 percentage points in parliamentary elections; the incumbency effect in municipal elections is negligible. (JEL D72, J45)