On science
Overpaid or underpaid? The economic benefits of getting elected in Finland appear relatively modest, writes Professor of Economics Marko Terviö.
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of elected politicians compares with the general population, or even how it compares with those who also run for office, but don’t get elected. The naive method of estimating the “effect” of getting elected would be to just compare elected and unelected politicians while controlling for any observed characteristics (such as age and pre-election income) that affect subsequent income. By this count, the winners of Finnish parliamentary elections subsequently earn about €33,000 more per year than “otherwise similar” losers (all monetary units in 2011 euros). However, the “otherwise similar” category, as based on any actual data, is likely to miss some important differences between winners and losers. The naive estimate of +€33,000 is not an approximation or a rough guesstimate of the causal effect of getting elected. It doesn’t even allow us to rule out the objection of the career politician, who claims that elected politicians give up more lucrative careers in the private sector by choosing to serve their country (implying that the true effect is negative). Surely those who succeed in politics could have succeeded in other careers as well – but whether they would have earned even more in those other careers is something that we can never observe in the data. Correlation versus causality Election winners may well be systematically Estimating the economic return of getting elected is different from election losers in ways that the a good example of a typical problem in economics: data does not reveal. It is plausible that there are how to estimate the causal impact of something that unobserved qualities, which would bring a person researchers cannot control. As is often the case, the greater success in electoral politics as well as in other hard question of causal impact is more interesting than the easier descriptive question of how the income careers. It could be ambition, risk-taking, or some HE REMUNERATION OF PARLIAMENTARIANS
is a perennial point of contention in Finland and other countries. Purely in terms of salary, members of the Finnish parliament earn almost twice the national average, but, of course, they are also different from the national average in many other respects. While many protest that this compensation is too high, others worry that aspiring politicians have to give up other, more lucrative careers to serve in parliament and that it is becoming harder to attract and retain the best talent for public service. Most politicians elected to the Finnish parliament stay there for only one or two terms before leaving, voluntarily or otherwise. The experience of working in parliament can be useful in many ways. Politicians may gain experience that helps them increase their subsequent earnings in the private sector – but they may also forgo opportunities for advancing in an alternative career. The economic return of public service must account for the forgone income of other careers. What are the actual benefits and costs of getting elected? How to measure the impact of the “treatment” of getting elected?
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