Moneycracy

How do wage and other \u85nancial bene\u85ts a¤ect the set of candidates for political o ¢ ce? In this theoretical paper, we answer the question by studying self-selection into politics of individuals with heterogeneous skills and heterogeneous motivations. Our predictions are in line with the e ¢ ciency wage results proposed by the extant literature when a benchmark model with skills as the sole relevant characteristic of individuals is considered. Welfare is increasing in the politicianswage since the best, i.e., high-skilled, individuals are attracted to politics only if their remuneration covers their high opportunity costs. Our \u85ndings are remarkably di¤erent when motivation is also taken into account. Welfare is not likely to be maximized when the politicianswage is relatively high, for high-skilled individuals with market-oriented rather than public-spirited motivation are attracted. Finally, we provide an overview of the labor market of politicians in Europe and suggest that the Italian Parliament might be representative of our ine ¢ ciency wage mechanism, which we call moneycracy