DP4075 | Incentive Contracts and Elections for Politicians with Multi-Task Problems

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We consider a model with a politician facing a multi-task problem while in office. The re-election mechanism distorts the allocation of effort in favour of tasks whose outcomes can be measured more precisely than others. We show that a combination of elections and incentive contracts can alleviate this inefficiency. The incentive contract does not require information about the performance of the politician and is self-financing across terms.