Pay for politicians and political investment: Evidence from the French municipal elections by Nicolas Gavoille, Stockholm School of Economics in Riga.
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This paper examines the relationship between the pay for politicians and the personal financial investment of candidates into their own campaign. If political remuneration plays a role in the attractiveness of political office, the willingness to invest personal financial resources in the campaign should vary accordingly. I construct for this purpose a dataset containing the campaign account of all the candidates running in the 2008 and 2014 French municipal elections in municipalities of more than 9,000 inhabitants, providing a total of more than 8,000 observations. In France, donations by companies are strictly prohibited, and about 80% of candidates’ campaign budget is composed of their personal contribution. To identify the effect of wage on political investment, I exploit a sharp population threshold at 20,000 inhabitants determining the wage of the elected mayor. First, I apply a RD design to control for unobservable municipal characteristics and the unobserved returns to office. Second, I implement a difference-in-differences approach, comparing the change in the investment of candidates in municipalities where the wage of the mayor increased between 2008 and 2014 to those running in municipalities remaining in the same population stratum. The results show that the wage negatively impacts the candidates’ political investment. This puzzling result is not only statistically significant but also economically sizeable: candidates running in municipalities just above the threshold spend about 30% less in their campaign than candidates running just below the threshold.