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Politicians are commonly believed to gain financially from holding and/or having held office. We argue that there may often also be economic downsides to pursuing a political career and investigate whether and when politicians can (not) capitalize on their political experience. We thereby study both entry into and exit from political office and directly compare the returns to politics across government levels and types of politicians. Empirically, we build on detailed information from Norwegian administrative register data over the period 1970–2019 to study individual-level income developments before, during and after a political career at the national and local levels (covering nearly 22,000 individuals and 700,000 person-years). Using an event-study methodology, we show that politicians on average witness a significant income boost during their time in office. In sharp contrast, leaving political office is on average associated with a substantial drop in income, which generally outweighs the income gain from entry into office. These findings suggest that most politicians face a net present value loss from holding office.

Using pooled cross-sectional data (eight waves of the European Social Survey), this work analysed how the regional unemployment rate influences the well-being disadvantages of the unemployed. We estimate region fixed effects and slopes models that, unlike the standard region fixed effects approach, provide an unbiased estimate of the cross-level interaction term (between being unemployed and the unemployment rate) in the absence of unobserved time-variant confounders. The results show that the satisfaction disadvantage of the unemployed (relative to the employed) is larger when the regional unemployment rate is higher. Smaller and insignificant differences were found regarding happiness. These results are in line with the argument that worse re-employment perspectives in high-unemployment regions may be particularly harmful to unemployed people. These results do not contradict the claim that, in regions with a weaker social norm to work, unemployed people may be more satisfied. Instead, they suggest that the unemployment rate does not reflect the social norm to work.

Friendship-and-love affords bonding that satisfies what can be called “transcendental preferences”—in contradistinction of “substantive preferences” afforded by, for example, food, clothes, and shelter. Substantive preferences involve ordinary “substantive cost,” whereas transcendental preferences involve “bonding cost” that includes heartaches, obsession, and emotional turmoil. What about the cost of gifts such as flowers, time, and other carriers of friendship-and-love? The greater is the expenditure on gifts, the greater the bonding cost. This paper investigates the following question: How should we model bonding cost, which includes the cost of gift, in relation to substantive cost? Given bonding cost and substantive cost share the same budget, neoclassical economists treat them as commensurable and, hence, transcendental and substantive preferences make up a unidimensional objective function. This treatment, however, originates the “gift anomaly”: If people easily substitute between the two genera of preferences, why do they consider the demand of payments for visiting their grandmothers—or payments for voting and sexual intercourse—as repugnant (taboo)? To solve the gift anomaly, this paper is critical of the standard economist's entry point. This paper proposes bonding and substantive costs as incommensurable and, corollary, transcendental and substantive preferences as incommensurable as well. This paper further shows how, without undermining the incommensurability thesis, the incommensurability is up to a limit: the two genera of costs and, corollary, the two genera of preferences are still linked via the income effect—as opposed to the substitution effect.

This paper analyzes optimal tax policy from the perspective of voters who want public policies to systematically advance their interests. Self-acknowledged ignorance implies that voters have a practical interest in transparent and stable tax systems that allow personal tax burdens to be calculated accurately and easily. Such properties reduce voter mistakes. However, a voter's normative interests may conflict with these practical interests, because ideas about a good life or good society often support tax system complexity. Tradeoffs between these two aims of democratic tax systems imply that the optimal tax system for a democracy neither minimizes voter errors nor maximizes a social welfare function.

Political selection is crucial for the functioning of democracy. However, the practice—in education and sports contexts—of artificially dividing school-age children into different age groups leads to a considerable bias in this selection. The probability of becoming a (successful) politician depends on individuals' relative age. Being born shortly after the cut-off date significantly increases the probability that an individual will be politically successful later in life. Using a regression discontinuity design, we find strong evidence of such relative age effect (RAE) among a large sample of Belgian federal parliamentarians over the period 1950–2019 (N = 4032), but not among municipal councillors (N = 7387), nor among municipal candidates (N = 36,740) in the 2018 election. The estimated overrepresentation of federal members of the parliament (MPs) born immediately after the cut-off date is up to 90% compared to politicians born just before the cut-off date. The overrepresentation is observed over the whole period and thus seems to be deeply rooted in the political system. We find the RAE to have a gendered dimension: The effect is driven by early-born male politicians' overrepresentation. No significant RAE was found among female politicians.

Short-time work (STW) is a policy measure whose prominence increases during economic crises and is intended to stabilize the labor market. Employers can temporarily reduce employees' working hours, which are in turn paid by the social security system in the meantime. Although short-time work—by design—saves employers a fraction of their wage costs, little is known about free riding behavior when using this option. Accordingly, we analyze the employee-reported free riding experience with respect to longer actual working hours than accounted for in employees' short-time work allowances, the unchanged workloads experienced by these employees, and announced lay-off decisions. Since these questions are certainly sensitive, we employ the crosswise model, a privacy-preserving technique, in a random half of the sample. Our results show significant employee-reported prevalences across all dimensions and a significant association between free riding and workers' job dissatisfaction. These findings thus highlight the importance of the crosswise model in uncovering these findings and demonstrate a specific drawback in the application of short-time work.

We investigate to what extent personal proximity and similarity in professional and political attributes, besides scientific factors, help explaining citations between economists. We do so by using a unique dataset of all academic economists based in the United Kingdom, created specifically for this study by merging RePEc data on works published in the past four decades with information collected by manually processing their curriculum vitae (CVs). We investigate directed citations within each pair of authors active in a same year, finding that social factors play an important role as predictors of citations. An author is systematically more likely to cite another economist not only if they work on similar topics, but most relevantly if they have been co-authors, faculty colleagues, alumni of the same Alma Mater, and even if they express similar political views. The implication is that citations do not signal the intrinsic quality of research outputs only, but they also capture social and professional connections. When citation counts are used to reward academics, economists have an incentive to join many and large professional communities as doing so would increase their predicted citations.

The institution of liability serves to mitigate the lack of care in almost all areas, whether private or business. However, we have not yet found such an institution in political decision-making. Surprisingly, the literature has not discussed a specific institution that subjects political actors who fail to exercise due diligence in their decision-making regarding personal liability. Hence, this paper aims to fill this gap and derive the necessity of internalizing the negative effects resulting from the imperfections of the market for political services in general and the democratic process, particularly by a liability rule. To design the new institution, we draw on the findings of corporate governance, combining economic thinking in incentives and legal knowledge expressed in the law of the corporation. In this respect, this paper is the first to make a concrete proposal for political liability accompanied by a political judgment rule. However, it is important to emphasize that the aim is not to punish a wrong decision but to provide strong incentives to prevent it ex ante. Political liability must be understood as a process-oriented institution that considers uncertainty and decision-making complexities. By proposing and analyzing this new institution, this work contributes to a broader discussion of incentive structures in the political process of modern democracies and shows how the political sphere can learn from the corporate world.

This study relies on a novel research approach to analyze how national income, income inequality, institutional quality, and culture combine to generate different recipes for eliciting subjective well-being (SWB). Specifically, we use fuzzy-set qualitative comparative analysis, which facilitates the study of the combinations of conditions (paths) that act synergistically to achieve a certain outcome. The study uses data from over 70 countries and finds several combinations of conditions for different periods which lead equally to high SWB, as well as several configurations equally leading to low SWB. Additionally, we find that high national income, income equality, high-quality institutions, and each of the cultural dimensions are not necessary conditions for high SWB. However, high-power distance and low individualism are necessary conditions to achieve low SWB. The results for a few individual conditions are in line with previous studies, but we also determine that the effect of the remainder depends on the other conditions present in each combination. Overall, the results deliver an original and contrasting view of the factors leading to a nation's high or low SWB.

This paper investigates the effect on academic performance of an exogenous educational reform that reduced the school calendar of non-fee-paying schools in the Madrid region (Spain) by approximately two weeks, leaving the basic curriculum unchanged. To identify the consequences of such a measure, we exploit the fact that it did not affect private schools (control group) and the existence of an external cognitive test that measures academic performance before and after its application in the region. We find that the reform worsened students' educational outcomes by around 0.13 of a standard deviation. This effect was especially strong in the subjects of Spanish and Mathematics. We further explored quantile effects across the distribution of exam scores, finding that the disruption had a more negative effect on students in the upper quartile than those in the lower quartile. Overall, the analysis shows a reduction in the gap across non-fee-paying schools and an increase in the gap between non-fee- and fee-paying schools.