Political Careers or Career Politicians?∗

Two main career paths are prevalent among politicians in modern democracies: there are career politicians (i.e., politicians who work in the political sector until retirement), and political careers (i.e., there are politicians who leave politics before retirement and work in the private sector). In this paper, we propose a dynamic equilibrium model of the careers of politicians in an environment with a private sector and a political sector, where individuals are heterogeneous with respect to their market ability and political skills. Our analysis provides an explanation for the existence of career politicians and individuals with political careers, and their motivations. We also investigate the effects of monetary incentives and other features of the political-economic environment on the quality of politicians and their careers. We show that an increase in the salary a politician receives while in office decreases the average quality of individuals who become politicians, decreases turnover in office, and may either decrease or increase the average quality of career politicians. ∗We are particularly indebted to Steve Coate for his insightful suggestions. We also thank two anonymous referees, seminar and conference participants at several institutions, Federico Echenique, Leonardo Felli, and Preston McAfee for their useful comments. Financial support from National Science Foundation grant SES0617901 to Mattozzi and SES-0617892 to Merlo is gratefully acknowledged. †Division of Humanities and Social Sciences, California Institute of Technology, . ‡Department of Economics, University of Pennsylvania, CEPR, CESifo and NBER, .