Money matters: The role of public sector wages in corruption prevention
| Published date | 01 March 2020 |
| Author | Agnes Cornell,Anders Sundell |
| Date | 01 March 2020 |
| DOI | http://doi.org/10.1111/padm.12634 |
ORIGINAL ARTICLE
Money matters: The role of public sector wages
in corruption prevention
Agnes Cornell|Anders Sundell
Department of Political Science, University of
Gothenburg, Gothenburg, Sweden
Correspondence
Anders Sundell, Department of Political
Science, University of Gothenburg, Box
711, Gothenburg 40530, Sweden.
Email: anders.sundell@pol.gu.se
Funding information
Riksbankens Jubileumsfond, Grant/Award
Number: M14-0087:1
Abstract
Economic theory as well as conventional wisdom from
corruption-ridden countries suggest that low wages among
public employees lead to corruption, but cross-sectional
empirical research has largely failed to confirm this relation-
ship. In this article, we investigate the relationship between
experiences of corruption and wage levels for public sector
employees, utilizing both objective and expert survey data,
with global coverage. The statistical analysis shows that
higher wages, as compared to the average wage in the
country, is associated with less corruption. There is also
some support, but weaker, for the hypothesis that corrup-
tion increases when wages fall below subsistence levels.
1|INTRODUCTION
‘I am confiscating your driving licence. You can collect it at the police station on Monday, but you will have to wait
all day, maybe longer. Shall we settle the matter here?’This was the offer given to a correspondent for The Economist
(2011) by a police officer in Mexico. Such episodes are commonplace. According to Transparency International (TI),
in some Mexican states, more than four out of five traffic stops result in a bribe being paid. Mexico is by no means
unique, or the worst example. In a recent global survey, about one in four respondents reported paying a bribe when
accessing public services in the last year (Transparency International 2017a).
A common explanation for why public officials take bribes is that they are underpaid (Becker and Stigler 1974).
The empirical link in existing research is, however, surprisingly weak. Cross-country comparisons have found weak
or no correlations between corruption and wages for public employees (Rauch and Evans 2000; Van Rijckeghem and
Weder 2001; Dahlström et al. 2012). A few experimental micro-level studies focusing on ‘petty’corruption have
found some effects (Di Tella and Schargrodsky 2003; Borcan et al. 2014), but also contradictory evidence (Foltz and
Opoku-Agyemang 2015). Moreover, case studies have suggested that wage increases have been a key component
of anti-corruption reform (Quah 1999, 2001; Alam and Southworth 2012), while others have pointed to massive cor-
ruption among relatively well-paid public officials (Buttle et al. 2016; van Vuuren 2004).
This article examines the link between wages and corruption theoretically and empirically. We elaborate on two
inter-related theoretical perspectives on the link between wages and corruption. First, the relative wage hypothesis:
Received: 14 November 2018Revised: 16 October 2019Accepted: 16 October 2019
DOI: 10.1111/padm.12634
244 © 2019 John Wiley & Sons LtdPublic Administration. 2020;98:244–260.wileyonlinelibrary.com/journal/padm
public employees want to maximize their income, and make a choice whether to take bribesor not depending on the
size of the bribe, their wage, and their prospects for earning in other occupations (Becker and Stigler 1974). All else
equal, higher wages should be associated with less corruption. But if wages are higher in other occupations, for
instance in the private sector, the risk of losing the public wage is less pressing, and employees therefore engage in
more bribe-taking. A complementary angle to this hypothesis is that public employees may consider the wage as
being unfair if it is low in relation to other occupations. The subjective assessment of the wage as unfair can result in
less loyalty to the organization and more bribe-taking among public employees (see Akerlof and Yellen 1990).
Second, the subsistence wage hypothesis: even if public employees do not strive to maximize their income with
any means possible, there is still reason to suspect that corruption is almost inevitable once wages fail to cover basic
needs. The logic of survival dictates that a person that is unable to survive on the official wage must seek some other
income—for instance, bribes. If this hypothesis is correct, we should expect corruption to be substantially higher in
contexts where official wages fail to cover basic needs.
In our empirical analysis we use several data sources to examine the two different perspectives on how wages
matter. The most-cited cross-country studies (Rauch and Evans 2000; Van Rijckeghem and Weder 2001) are based
on decades-old data, only include a small number of countries, or employ measures of wages that focus on the higher
levels of the civil service (Dahlström et al. 2012). Our empirical analysis contributes with different sets of recent data
on a broader range of countries. The data employed allow us to measure wages in various ways in order to address
the two perspectives on how wages may be related to corruption. Our results indicate that higher relative wages
prevent corruption, and that there is also some, albeit weaker, empirical support for there being a meaningful thresh-
old at subsistence levels. This article thus contributes to a deeper understanding of the problem by teasing out some
contradictions in the literature, presenting new cross-country evidence, and pointing to a new direction for research.
2|PREVIOUS RESEARCH
Corruption can take many forms. The common definition ‘misuse of public power for private gain’(Rose-Ackerman
1999, p. 91) fits grand schemes where private businesses and senior officials conspire to defraud thegovernment of
billions of dollars, nepotistic hiring of relatives to public jobs, as well as the extraction of informal payments for public
services, among others. We focus on a clear-cut example of corruption: bribe-taking by public employees, sometimes
referred to as ‘petty corruption’. The name refers to the smaller sums involved, but is still somewhat misleading, since
the phenomenon affects billions of people and can have important detrimental effects on, for instance, incomes and
access to healthcare. Previous research has argued that this form of corruption has a direct relationship with wages.
Existing research on the topic broadly falls into two categories: cross-country comparisons using broad indicators
of wages and corruption, and micro-level studies on specific reforms. The results are a mixed bag.
Beginning with the studies in the cross-country category, two studies that rely on expert assessment of wage
levels (Rauch and Evans 2000; Dahlström et al. 2012) find that the correlation between wages and corruption is
close to zero. It should be noted that the survey questions employed in this research are about wages for ‘higher offi-
cials’and ‘senior officials’, rather than public employees in general. A few other studies instead rely on objective
wage data, usually using wage levels in the manufacturing sector as a reference point (La Porta et al. 1999; Treisman
2000; Van Rijckeghem and Weder 2001). Only Van Rijckeghem and Weder find, with a small sample of countries,
the expected negative association, but the effects are weak: wages would have to be increased dramatically to eradi-
cate corruption.
The results from experimental micro-level research are also inconclusive. Studying a crackdown on corruption in
a Buenos Aires hospital, Di Tella and Schargrodsky (2003) find that higher wages were associated with lower corrup-
tion, measured as unexplained price mark-up on hospital supplies. Borcan et al. (2014) investigate the effects of a
large cut to teacher salaries in Romania, and find indications that corruption in a high-stake exam might have
increased as a result. On the other hand, in what should be a straightforward test of the hypothesis, Foltz and
CORNELL AND SUNDELL 245
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting