Do Government Wage Cuts Close Budget Deficits? Costs of Corruption

Nadeem Ul Haque and Ratna Sahay
Additional contact information
Nadeem Ul Haque: International Monetary Fund

IMF Staff Papers, 1996, vol. 43, issue 4, 754-778

Abstract: Real wage declines have been common in the public sector in many countries over substantial periods of time. In several cases, such wage reductions have coincided with declines in the efficiency of the public sector. In a simple analytical framework, it is shown that higher wage levels alter the incentive-compatible equilibrium by attracting relatively skilled human capital to the government sector, which raises the quality of public output--tax revenue collection in this paper. Increases in wages should complement appropriate monitoring and penalty rates for effective tax administration; prescriptions of raising the statutory tax rate alone, however, may not increase revenue collection.

JEL-codes: H1 H26 J45 L42 (search for similar items in EconPapers)
Date: 1996
References: Add references at CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://www.jstor.org/stable/3867368?origin=pubexport main text (application/pdf)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:pal:imfstp:v:43:y:1996:i:4:p:754-778

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2

Access Statistics for this article

More articles in IMF Staff Papers from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().