The causes of legal rents extraction: evidence from Spanish municipalities

This paper analyzes the causes of legal political rent extraction by using a direct measure of it, namely, local top politicians’ wages. In particular, we investigate whether local politicians’ incentives to extract rents by setting their own wages are influenced by the degree of political competition and voter information. We use a sample of the largest Spanish municipalities over the years 2008–2010. The results indicate that weaker political competition and lesser voter information are related to more rent extraction. In an additional analysis, we show that higher wages do not ensure better financial management. These findings confirm that when politicians can set their own salaries, higher wages do not mean better management, but they are just political rents.