Dynamic Returns to Political Tenure

Dynamic Returns to Political Tenure

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 are due to the first two periods of political tenure, but no substantial returns emerge during the more advanced career stages. These findings emphasize that politicians elected for a first and 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 in favor of career-based explanations and against in-office returns.