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Self-serving legislators? An analysis of the salary-setting institutions of 27 EU parliaments

Abstract

It is often criticized in public debates that politicians in many jurisdictions have the power to set their own salaries. This paper scrutinizes this practice from a constitutional political economy perspective. A novel dataset is presented which provides an empirical overview of the methods used to set the pay for members of parliament (MPs) in the national parliaments of 27 member states of the European Union. There is considerable cross-country variation in this respect. While in the majority of national legislatures MPs to some degree decide on their own salaries (i.e., ‘self-service’ model), in some systems MP pay is set by bodies independent from MPs. A multiple regression analysis provides empirical support for the self-serving-legislators prediction derived from Public Choice theory: controlling for population size and living costs, salaries are systematically higher in legislatures in which MPs have some say in their own salaries. However, this result has to be interpreted with caution as (1) independent wage-setting bodies exist only in five parliaments, and (2) this study could only include MPs’ basic salaries.

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Notes

  1. Like in McCormick and Tollison (1978), Besley (2004), Messner and Polborn (2004), Gersbach (2009) and other contributions to the “paying politicians” literature, in what follows the terms salary, wage, pay and remuneration are used interchangeably to denote the monetary earnings a MP receives in a given period (say, a month or year) for doing his/her parliamentary job.

  2. See also McCormick and Tollison (1981), Buchanan (2003), Besley (2004), or already Downs (1957: 28): “From the self-interest axiom springs our view of what motivates the political actions of party members. We assume that they act solely in order to attain the income, prestige, and power which come from being in office.”

  3. See also Hood and Peters (2003), Behnke et al. (2008), and Brans and Peters (2012: 18) who note: “The individual country chapters in this book reveal particular features that are too unique and variegated to capture in cross country comparisons.”

  4. See e.g., Dekker (2013). Judge (1984: 59) provides a survey of the debate about “the proper level of salary for MPs,” discusses different pay criteria/mechanisms, and concludes: “How much is an MP worth? Who decides? Throughout the centuries there has been a profusion of partial, uncomfortable, embarrassing and often contradictory answers, but satisfactory and universally acceptable ones still remain undiscovered.”

  5. The wages cover the total economy and are expressed per full-time equivalent employee (data source: UNECE Statistical Database and ILO Global Wage Database). For ‘non-Eurozone countries,’ wages have been converted using the ECB’s EUR reference exchange rates (average over the year 2011).

  6. An explanation for this result is provided by McCormick and Tollison (1978: 67): when “legislative pay is set in the constitution… [pay] is quite difficult to change. A new wage would require the passage of a constitutional proposal. Such proposals typically emanate from the legislature under relatively strict voting and quorum rules and must be signed by the governor and passed in a statewide referendum.”

  7. See also McCormick and Tollison (1978: 67): “There is also some use of pay commissions among [US] states. These commissions are appointed by the legislature, and no elaborate theory of regulation is needed to explain why we treat these states as cases where the legislature sets the wage.”

  8. Note that the correlation between ‘IndepBody’ and ‘GDP per capita’ (log) remains statistically significant at the 5 % level if each of the ‘IndepBody’ nations (FIN, FRA, IRL, SWE, UK) is excluded in turn from the EU-26 sample without the outlier Luxembourg.

  9. An alternative explanation is offered by Squire and Hamm (2005: 86): “Large populations generate more income that can be used to finance the legislature, and the costs are spread across more people.”

  10. See e.g., Bell (2010). In its mission statement, IPSA writes: “Our approach and rules are a clean break from the old system of self regulation by MPs and the House of Commons. The new rules are fair to MPs and the public purse, workable and, crucially, transparent—anyone can go online and see what their MP has claimed for and what they are paid. […] For the first time, an independent body, IPSA, not Parliament nor the government of the day, is going to determine the package of remuneration that MPs will get” (see http://parliamentarystandards.org.uk, accessed November 21, 2013).

  11. For more details, see the country information on the Swedish and Irish case in Brans and Peters (2012), on the Finnish case in Kotakorpi and Poutvaara (2011), and on the British case in Kelly (2013).

  12. In this context, Hood and Peters (1994, 2003) and many others use the ‘iceberg’ metaphor. For example, Nunberg and Wescott (2003: xiii) speak of a “largely invisible, compensation ‘iceberg’” and add: “In democratic contexts, governments fear upsetting constituents who favor egalitarian basic wage structures, and the ‘real’ rewards are thus obscured beneath the water’s surface.”

  13. See http://www.camera.it/leg17/383?conoscerelacamera=4, accessed November 21, 2013.

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Acknowledgments

The author is grateful to Jennifer Rontganger, Bernd Schlipphak, Ludger Wortmann, the participants of the European Center for the Study of Public Choice (ECSPC) Conference “Rethinking the Separation of Powers” at the Walter Eucken Institute Freiburg (Germany, May 6–7, 2013), two anonymous referees and the editor, Roger D. Congleton, for their useful comments and suggestions.

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Appendix

Appendix

See Table 3.

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Mause, K. Self-serving legislators? An analysis of the salary-setting institutions of 27 EU parliaments. Const Polit Econ 25, 154–176 (2014). https://doi.org/10.1007/s10602-013-9150-y

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Keywords

  • Members of parliament
  • Separation of powers
  • Paying politicians
  • European Union

JEL Classification

  • D72
  • J33
  • J45