Reward or Punishment? The Distribution of Life-Cycle Returns to Political Office

The remuneration of MPs affects who engages in politics. Even if average returns to office are positive, as found in all other studies, some officeholders’ returns are likely negative. Further, the timing of returns to office is crucial as politicians often enjoy delayed compensation like lucrative pensions. Utilizing administrative data for parliamentary candidates in Denmark from 1994 to 2015, we estimate first-time runners’ earnings and total income returns to office. Based on total income, practically all elected MPs experience economic gains during their first term. Computations of life-cycle returns reveal that the 25 percent highest earning candidates (pre-office) have no long-term economic gain from winning. Generally, considering the distribution and timing of returns to office improves studies of how office-holding is economically rewarded.