Wages and Other Determinants of Corruption

Abstract

Raising wages has commonly been viewed as an anticorruption policy by policymakers from both governments and multilateral development organizations. Conventional wisdom and recent theoretical work suggest that low wages encourage corruption. Nevertheless, the empirical studies done on the wagecorruption tradeoff are econometric estimates that find no conclusive support for the effectiveness of increasing wages as an anticorruption measure. The unique contributions of this paper are the application of an expected utility model to explain the emergence of corruption, and the use of comparative static results that are consistent with the empirical evidence and useful for the design of anticorruption policies. The most important result from the expected utility model is that anticorruption policies designed to increase the net income of potentially corrupt agents not only may be ineffective but may actually encourage corruption.

The Cost of Corruption in Higher Education

“…The probability that an instructor accepts a bribe increases as the difference in the market value of the instructor's wage and the university wage widens. If bribery cannot be detected easily or if sanctions are weak, the probability of bribe taking is even higher (Becker and Stigler 1974;Rose-Ackerman 1975;Shleifer and Vishny 1993;van Rijckeghem and Weber 2001;Sosa 2004). The sanctions imposed for revealed corruption are severe at foreign-operated universities such as the American University of Central Asia or the Kazak-Turkish Institute and include expulsion of students and firing of faculty.…”

Exploring the Links Between Corruption and Growth

“…Parallel to the corruption–growth literature is a second strand of literature that has sought to ascertain the determinants of corruption (e.g. Sosa, 2004; Lederman et al., 2005). In perhaps the most comprehensive econometric analysis, Treisman (2000) tested a wide range of theoretical explanations of corruption and finds mostly factors that are difficult to change in the short to medium run as determinants of corruption 4 .…”

Can Corruption be Studied in the Lab? Comparing a Field and a Lab Experiment

“…While initially seen as "grease-in-the-wheel" (Lui 1985), corruption has been mostly found to reduce welfare by acting as "sand-in-the-wheel". 5 Another major branch of the theoretical literature is concerned with evaluating possible corruption deterrents such as higher wages (Becker and Stigler 1974, Mookherjee and Png 1995, Sosa 2004, increased monitoring (Besley and McLaren 1993, Mookherjee 4 For more comprehensive surveys of the economic literature on corruption see Bardhan (1997), or Jain (2001. For a survey focusing more speci…cally on the theoretical approach, see Aidt (2003).…”