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Public-sector wages and corruption: An empirical study

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  • Chen, Yanting
  • Liu, Qijun

Abstract

An important public-policy question is whether public-sector wages can be used to deter corruption. We study the relation between public-sector wages and corruption in China. Our measure of corruption is the value of bribes obtained by government officials as reported in court proceedings. The data cover the period 1985 to 2014. We hypothesize that the public-sector wage is a reference point for bribe payers and bribe takers in determining the value of bribes, and that external wage opportunities for comparison with public-sector wages, as proposed by the fair-wage hypothesis, are not required to determine the relation between public-sector wages and corruption. Our empirical estimates confirm our hypothesis. We find no consistent support for the fair-wage hypothesis but a systematic U-shaped relation between the public-sector wage and corruption measured as the value of bribes. We conclude that ‘carrots’ of higher public-sector wages reduce corruption when the public-sector wage is low, but, when the public-sector wage is high, ‘sticks’ rather than carrots seem to be required to deter corruption.

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  • Chen, Yanting & Liu, Qijun, 2018. "Public-sector wages and corruption: An empirical study," European Journal of Political Economy, Elsevier, vol. 54(C), pages 189-197.
    • Handle: RePEc:eee:poleco:v:54:y:2018:i:c:p:189-197
    DOI: 10.1016/j.ejpoleco.2018.06.006
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    3. Weißmüller, Kristina Sabrina & Zuber, Anna, 2022. "Understanding the Micro-Foundations of Administrative Corruption in the Public Sector: Findings from a Systematic Literature Review," OSF Preprints z9bcy, Center for Open Science.
    4. Federico Ceschel & Alessandro Hinna & Fabian Homberg, 2022. "Public Sector Strategies in Curbing Corruption: A Review of the Literature," Public Organization Review, Springer, vol. 22(3), pages 571-591, September.
    5. Aidt, Toke S. & Hillman, Arye L. & Qijun, LIU, 2020. "Who takes bribes and how much? Evidence from the China Corruption Conviction Databank," World Development, Elsevier, vol. 133(C).

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    More about this item

    Keywords

    Corruption; Public-sector wages; The fair-wage hypothesis; China;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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