Economics at your fingertips  

Do higher government wages induce less corruption? Cross-country panel evidence

Weihua An and Yesola Kweon

Journal of Policy Modeling, 2017, vol. 39, issue 5, 809-826

Abstract: Prior studies have lent mixed evidence on the effectiveness of increasing government wages to reduce corruption. Based on a dynamic principal–agent model, this study uses cross-country data over ten years (1999–2008) and various statistical models to present updated evidence. Our analyses show that increasing government relative wage by one unit (i.e., by the amount of the average manufacturing wage in a country) is associated with a decrease in the level of perceived corruption by 0.26 units. The effect appears to be particularly significant for non-OECD countries (where corruption is more rampant) or for countries with a relatively low government wage. The overall policy implication is: increasing government wages can help curtail corruption, but solely relying on increasing government wages to reduce corruption can be very costly. For example, to reduce the level of corruption in non-OECD countries to that in OECD countries, the government wage would have to be increased by about seven times.

Keywords: Corruption; Bureaucracy; Principal–agent model; Game theory; Panel data analysis (search for similar items in EconPapers)
JEL-codes: D73 D72 C70 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Policy Modeling is currently edited by A. M. Costa

More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-09-29
Handle: RePEc:eee:jpolmo:v:39:y:2017:i:5:p:809-826