Returns to Political Office

Do Politicians Financially Benefit from Political Office?

In Eggers and Hainmueller (2009), this study investigates the financial returns to serving in Parliament, focusing on the wealth accumulation of British politicians. While many studies highlight the advantages firms gain from political connections, less attention has been given to how much politicians themselves benefit financially from wielding political influence.

Using original data on the estates of deceased British politicians, the authors employ matching and a regression discontinuity design to compare Members of Parliament (MPs) with candidates who narrowly lost elections. The findings reveal a stark contrast: serving in Parliament nearly doubled the wealth of Conservative MPs but had no discernible financial benefits for Labour MPs.

The wealth increase for Conservative MPs is primarily attributed to lucrative outside employment opportunities acquired due to their political positions. For instance, gaining a parliamentary seat more than tripled the likelihood that a Conservative MP would later serve as a director of a publicly traded firm, accounting for much of the observed wealth differential.

In contrast, Labour MPs did not financially benefit from office largely because trade unions exerted significant control over the party, preventing MPs from leveraging their positions for personal financial gain. These findings shed light on how party structures and external influences shape the financial outcomes of political office.