Effects of public sector wages on corruption: Wage inequality matters

Asli Demirguc-Kunt, Michael Lokshin and Vladimir Kolchin

Journal of Comparative Economics, 2023, vol. 51, issue 3, 941-959

Abstract: The paper uses a new country-level, panel data set to study the effect of public sector wages on corruption. The results show that wage inequality in the public sector is an important determinant of the effectiveness of anti-corruption policies. Increasing the wages of public officials could help reduce corruption in countries with low public sector wage inequality. In countries where public sector wages are highly unequal, however, raising the wages of government employees could increase corruption. These results are robust to a wide range of empirical model specifications, estimation methods, and distributional assumptions. Combining increases in public sector wages with policies affecting wage distribution could help policy makers design cost-effective programs to reduce corruption in their countries.

Keywords: Corruption; Bureaucracy; Panel data analysis; Public-private wage differential; Government wage policy (search for similar items in EconPapers)
JEL-codes: D73 J38 J45 O57 (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Effects of Public Sector Wages on Corruption: Wage Inequality Matters (2023)
Working Paper: Effects of Public Sector Wages on Corruption: Wage Inequality Matters (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:51:y:2023:i:3:p:941-959

DOI: 10.1016/j.jce.2023.03.005

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