Pay Incentives in Politics: Evaluating a Large-Scale Salary Increase for Local Politicians

We evaluate the impact of a recent reform that sharply increased the salaries of Italian local politicians on electoral competition and the valence attributes of the candidates elected. Exploiting misaligned election dates across Italian cities, we propose a novel methodology, the time-shifted control design (TSCD), to estimate the reform's impact on municipalities up to 30,000 inhabitants, representative of almost the entire universe of Italy's local administrative units. We find a boost in the entry of new political candidates after the first post-reform electoral round, with no significant enhancement in the overall quality of the political class. These outcomes possibly stem from the varying distribution of compliers—whose candidacy decision is influenced by the reform—across diverse political and economic contexts. Thus, we find that in less affluent areas or those with fewer entry barriers, the pay rise drew a larger number of mayoral candidates, encouraging individuals from outside the political sphere to enter the competition. In the poorest contexts, we also observe a shift in the profile of councilors and members of the mayor's executive committee, where the pay rise attracted individuals with lower educational levels but with experience in white-collar positions.