The politicians’ wage gap: insights from German members of parliament

Using a unique dataset of German members of parliament (MPs) this paper analyzes the politicians’ wage gap (PWG). After controlling for observable characteristics as well as accounting for election probabilities and campaigning costs, we find a positive income premium for MPs which is statistically and economically significant. Our results are consistent with the citizen candidate model: The PWG amounts to 35–65% when comparing MPs to citizens in an executive position. However, it shrinks to zero when restricting the control group to top-level executives. This suggests that German politicians do not receive excessive pay when compared to senior executives.