Scandal, protection, and recovery in political cabinets

Working paper

Empirical evidence suggests that a Prime Minister can benefit from firing ministers who are involved in political scandals. We explore a model in which a minister's exposure to scandals is positvely related to his policy activism, so that a Prime Minister may wish to protect him from resignation calls. We find that protection can sometimes work against the objective of encouraging activism: it makes a minister's position more valuable to him and hence can encourage him to sit tight by moderating his activities. On the other hand, an exogenous increase in exposure to scandals may lead a minister to live for today by pursuing controversial policy innovations. The Prime Minister's ability to protect ministers from resignation calls is limited by her short-term incentive to fire. She may, however, enhance her credibility by building a collective reputation with the wider membership of her cabinet; we show that heterogeneity of cabinet membership can play an important role.

Authors: Myatt, D; Dewan, T

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2005-06-01
• Paper number: 237
• Keywords: reputation; protection; ministerial resignations; multi-market contract; relational contracts; incentives