The Impact of Tenure-Dependent Benefits on Government Stability

Abstract

I combine newly digitized data on confidence votes, party switches, and tax returns of Italian MPs from 2001 to 2022 to study how tenure-dependent benefits influence politicians’ behaviour and government stability. Using a difference-in-discontinuities design, I find that a tenure requirement for parliamentary pensions introduced in 2008 increased confidence votes for the government, switches to majority parties, and legislative effort. Consistent with agency model predictions, the policy discouraged internal party defiance that could jeopardize reelection chances and pension eligibility for a second term. Tenure requirements increase government stability but also strengthen party control, with ambiguous effects on voters’ welfare.