Andrew Eggers and Jens Hainmueller: MPs for Sale? Returns to Office in Postwar British Politics
Many recent studies show that firms profit from connections to influential politicians, but less is known about how much politicians financially benefit from wielding political influence. We estimate the returns to serving in Parliament, using original data on the estates of recently deceased British politicians. Applying both matching and a regression discontinuity design to compare Members of Parliament (MPs) with parliamentary candidates who narrowly lost, we find that serving in office almost doubled the wealth of Conservative MPs, but had no discernible financial benefits for Labour MPs. Conservative MPs profited from office largely through lucrative outside employment they acquired as a result of their political positions; we show that gaining a seat in Parliament more than tripled the probability that a Conservative politician would later serve as a director of a publicly traded firm—–enough to account for a sizable portion of the wealth differential.We suggest that Labour MPs did not profit from office largely because trade unions collectively exerted sufficient control over the party and its MPs to prevent members from selling their services to other clients.[my emphasis]Very nice paper. More specifically on why the effect is seen in Conservative rather than Labour MPs:
We argue that the larger benefit enjoyed by Conservative MPs was due in part to differences in the way the parties were financed and organized. In the period in which these MPs were elected, the Labour Party was funded and dominated by a handful of trade unions that used their influence to secure the exclusive loyalty of a large proportion of Labour MPs. The Conservative Party, in contrast, gathered its financial support from diffuse contributors and had no dominant constituency, leaving MPs relatively free to forge relationships with numerous outside firms that competed for their legislative services. MPs from both parties thus explicitly provided services to outside interests, but the trade unions shaped Labour Party institutions such that they could acquire those services without bidding for the services of individual MPs.Of course, this means in equilibrium that the Conservatives are able to attract much higher quality candidates than is Labour as their effective pay rate is higher.