Ethics laws and the outside earnings of politicians: The case of Alabama's “legislator-educators”

Concluding remarks

This paper has reported evidence on the returns to legislating. In particular, we examined the distributional impact of a provision of Alabama's Code of Ethics which allows sitting state legislators to be on the payroll of public institutions of higher education. Using salary and educational budget data for 1987–88, we found that public funding per student for the junior and senior colleges in the state which employ legislators as educators is significantly higher than that received by comparable institutions.

Our empirical results suggest that Alabama's legislators selectively redistributed nearly $19 in available public education funds for every $1 received in outside earnings permitted by the state's code of ethics. The data thus imply that the brokerage fee assessed by legislators for redistributing wealth is on the order of 5% of the value of the transfer.

More importantly, our paper speaks to the importance of the relationship between legislative salaries, ethics laws, and the outside earnings of politicians. Because low wage pay for legislators lowers the returns to legislating on one margin, legislators will favor less stringent standards of ethical behavior that allow them to legitimately appropriate more of the value of legislation from outside sources. Pressure groups also benefit from a combination of low legislator salaries and loose ethical codes for politicians. When legislators collect a larger share of the returns to legislating in the form of outside earnings, they rationally devote more attention to special interests as opposed to taxpayer interests. They certainly appear to do so in the case of funding for higher education in Alabama.