While the role of money in policymaking is a central question in political economy research, surprisingly little attention has been given to the rents politicians actually derive from politics. We use both matching and a regression discontinuity design to analyze an original dataset on the estates of recently deceased British politicians. We find that serving in Parliament roughly doubled the wealth at death of Conservative MPs but had no discernible effect on the wealth of Labour MPs. We argue that Conservative MPs profited from office in a lax regulatory environment by using their political positions to obtain outside work as directors, consultants, and lobbyists, both while in office and after retirement. Our results are consistent with anecdotal evidence on MPs’ outside financial dealings but suggest that the magnitude of Conservatives’ financial gains from office was larger than has been appreciated.
Andy isn’t sure about the substantive impact that this has for political science, given the disparities between the amounts of money that flows through politicians’ hands in functioning democracies and the amounts of money that they may personally derive from office. I’m not so sure about that, as the monies sticking to politicians’ hands do likely help shape their incentives (e.g. one can plausibly speculate that Tories who rock the boat too much aren’t going to have much luck cashing in on those directorships), but, in any event, the fact that Andy doesn’t spot any obvious methodological problems makes me at least think that the observed effect is likely real.
[Cross-posted at Crooked Timber]