A Drawback of Political Accountability

Abstract

We investigate the behavior of an incumbent politician in the presence of career concern in a multiple-task setting with both adverse selection and moral hazard. We show that an incumbent politician faced with an election appropriates less rent than he would under no career concerns, but at the same time distorts policy choice to signal his type. Due to the conflicting effects, the overall effect of political accountability on welfare is ambiguous. This also implies that contrary to some existing literature, the productivity of politicians retained by elections may improve over time. We also consider the implication of our analysis for term limits.