Institutionalized Public Sector Corruption:a Legacy of the Soeharto Franchise

Ross McLeod ()

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: Attempts to maintain prices different from those that would otherwise be determined by supply and demand are virtually guaranteed to result in illegal behaviour, including in the case of laws that determine the salaries of civil servants. In Indonesia, private sector salaries are highly progressive with respect to increasing levels of responsibility, whereas the civil service structure is very flat, resulting in an enormous gap between private and public sector salaries at higher levels of management. As a consequence, informal--and often illegal--income generating practices are observed that make public sector careers far more attractive than formal remuneration levels would suggest. It is argued here that it is unhelpful to view endemic corruption simply in terms of unprincipled behaviour. Rather, it is best understood in terms of institutional weakness in the form of continued reliance on entrenched personnel management practices from the Soeharto era that deliberately ignored market realities.

Keywords: franchise; Indonesia; rents; private taxation; bureaucratic extortion (search for similar items in EconPapers)
JEL-codes: D72 D73 P16 P17 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010
New Economics Papers: this item is included in nep-pbe and nep-sea
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pas:papers:2010-02

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