Social Choice and Welfare

, Volume 44, Issue 3, pp 473–492 | Cite as

Political cronyism

  • Galina ZudenkovaEmail author


This paper analyzes incentives for cronyism in politics within a political agency model with moral hazard. The analysis focuses on the institutional features, which define contractual and appointment procedures within political organizations. The institutional framework does not allow explicit contracting with politicians. They are motivated by reelection incentives and just need to guarantee that their team performance exceeds the minimum threshold required for reelection. This lowers the returns to bringing in efficient individuals in the politician’s team. Moreover, the nature of political promotions (such that a crony’s career is tied to that of his patron) leads to the alignment between political objectives of the politician and his cronies. This further increases the politician’s incentives to appoint less efficient friends.

JEL Classification

D72 D73 



I am grateful to Luis Corchón, Montserrat Ferré, Kai Konrad, Humberto Llavador, Massimo Morelli, an anonymous referee, an associate editor, and John Duggan, the managing editor, for helpful comments, suggestions and encouragement. I also thank seminar and conference participants at several institutions for useful comments and suggestions. The grant from Karin-Islinger-Stiftung foundation and project grant ECO2011-25203 from the Spanish Ministry of Science and Innovation are gratefully acknowledged. An early version of this paper circulated under the title “Cronyism in Business, Public Sector and Politics”. The usual disclaimer applies


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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of MannheimMannheimGermany

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