KTI Szeminárium: David Medina Rodriguez (University of Malaga, University of Padova) – Life pension and Parliamentarian Effort
Many democracies grant their parliamentarians access to an exclusive pension system. While there has been much debate about the financial cost of such schemes, little attention has been paid to their effect on parliamentary effort. We propose a model that captures the two main features of life pension schemes: i) the pension amount is increasing with seniority, and ii) age determines parliamentarians’ eligibility. Our model highlights heterogeneous incentives to exert parliamentarian effort: introducing a life pension decreases the effort of eligible parliamentarians with high accumulation levels and increases or maintains the effort of all other parliamentarians. We test this model using the introduction of the life pension in Italy in 1955 where the eligibility of parliamentarians depends on their age and the amount accumulated depends on their seniority. Our empirical results show that the prospects of accumulating a higher pension stimulates parliamentarians to exert more effort, especially when parliamentarians are not eligible. In contrast, eligible parliamentarians face a trade-off between accumulating further benefits or enjoying the life pension straight away. Senior eligible parliamentarians decrease their effort while all other parliamentarians maintain or increase their effort.
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