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Scandal, protection, and recovery in the cabinet

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Empirical evidence suggests that a prime minister benefits from firing ministers who are involved in political scandals.We explore a model in which scandals are positively related to policy activism, so that a prime minister may wish to protect a minister from resignation calls. We find that protection can sometimes discourage activism: it enhances the value of a minister’s career and hence encourages 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 policies. The primeminister’s ability to protect ministers is limited by her short-term incentive to fire. She may, however, enhance her credibility by building a collective reputation with the cabinet; the heterogeneity of cabinet membership plays an important role.

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