Effects of Public Sector Wages on Corruption : Wage Inequality Matters
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. In...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/387481619624669061/Effects-of-Public-Sector-Wages-on-Corruption-Wage-Inequality-Matters http://hdl.handle.net/10986/35521 |
| Summary: | 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. The relation persists when
controlling for latent omitted variables, using the share of
contracts in the private sector as an instrument for the
public-private wage differential. Combining increases in
public sector wages with policies affecting the wage
distribution could help policy makers design cost-effective
programs to reduce corruption in their countries. |
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