Abstract
How do wage and other financial benefits affect the set of candidates for political office? 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 efficiency wage results proposed by the extant literature when a benchmark model is considered with skills as the sole characteristic of individuals. Welfare is increasing in the politicians’ wage since the best, i.e., high-skilled, individuals are attracted to politics only if remuneration covers their high opportunity costs. Our findings are remarkably different when also motivation is taken into account. Welfare is not likely to be maximum when the politicians’ wage is maximum for individuals are attracted whose motivation is well fitted with the market rather than the public sector. Finally, we provide an overview of the labor market of politicians in some Western countries and suggest that the Italian case might be representative of our inefficiency wage mechanism, which we call moneycracy.