Dynamic Returns to Political Tenure

Abstract

Economists frequently assert that politicians derive financial returns from a political career, but these returns can be obscured by the varying duration of political careers. In this study, I estimate the financial returns associated with successive mandates in the Lower House, capitalizing on the repetitive treatment assignment through close elections in the Netherlands from 1848-1917. Employing a dynamic regression discontinuity framework, I establish that the financial benefits accruing to politicians exhibit a distinct “gate-keeping” pattern: no financial gains are observed during the first period of political tenure, but substantial returns emerge during the second term. These findings emphasize that politicians elected for a second term exhibit significantly higher end-of-life wealth than their losing counterparts, equivalent to several years’ salaries. I also explore various potential mechanisms, providing evidence for in-office returns.

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