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Public Sector Pay and Corruption: Measuring Bribery from Micro Data

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Author Info
Yuriy Gorodnichenko () (University of Michigan)
Klara Sabirianova Peter () (Georgia State University and IZA Bonn)

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Abstract

This study is the first to provide a systematic measure of bribery using micro-level data on reported earnings, household spending and asset holdings. We use the compensating differential framework and the estimated sectoral gap in reported earnings and expenditures to identify the size of unobserved (unofficial) compensation (i.e., bribes) of public sector employees. In the case of Ukraine, we find that public sector employees receive 24-32% less wages than their private sector counterparts. The gap is particularly large at the top of the wage distribution. At the same time, workers in both sectors have essentially identical level of consumer expenditures and asset holdings that unambiguously indicate the presence of nonreported compensation in the public sector. Using the conditions of labor market equilibrium, we develop an aggregate measure of bribery and find that the lower bound estimate of the extent of bribery in Ukraine is between 460 mln and 580 mln U.S. dollars (0.9-1.2% of Ukraine’s GDP in 2003).

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1987.

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Length: 58 pages
Date of creation: Feb 2006
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Handle: RePEc:iza:izadps:dp1987

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Related research
Keywords: wage; wage differentials; public sector; corruption; bribery; Ukraine;

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Find related papers by JEL classification:
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J4 - Labor and Demographic Economics - - Particular Labor Markets
O1 - Economic Development, Technological Change, and Growth - - Economic Development
P2 - Economic Systems - - Socialist Systems and Transition Economies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Matthieu Chemin, 2008. "Do Criminals Politicians Reduce Corruption? Evidence from India," Cahiers de recherche 0825, CIRPEE. [Downloadable!]
  2. Axel Dreher & Martin Gassebner, 2007. "Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Chi, Wei & Wang, Yijiang, 2008. "Bribe-Taking by Bureaucrats: Personal and Circumstantial Determinants," MPRA Paper 8668, University Library of Munich, Germany. [Downloadable!]
  4. Aidt, T.S. & Gassebner, M., 2007. "Do Autocratic States Trade Less?," Cambridge Working Papers in Economics 0742, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  5. Yuriy Gorodnichenko & Jorge Martinez-Vazquez & Klara Sabirianova Peter, 2007. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," International Studies Program Working Paper Series, at AYSPS, GSU paper0720, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
    Other versions:
  6. Yuriy Gorodnichenko & Jorge Martinez-Vazquez & Klara Sabirianova Peter, 2007. "Myth and Reality of Flat Tax Reform: Tax Evasion and Real Side Response of Russian Households," International Studies Program Working Paper Series, at AYSPS, GSU paper0728, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  7. Tilman Brück & Alexander M. Danzer & Alexander Muravyev & Natalia Weißhaar, 2007. "Determinants of Poverty during Transition: Household Survey Evidence from Ukraine," ESCIRRU Working Papers 2, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  8. Mirco Tonin, 2007. "Minimum Wage and Tax Evasion: Theory and Evidence," IEHAS Discussion Papers 0701, Institute of Economics, Hungarian Academy of Sciences. [Downloadable!]
    Other versions:
  9. Osipian, Ararat, 2009. "Education Corruption, Reform, and Growth: Case of Post-Soviet Russia," MPRA Paper 17447, University Library of Munich, Germany. [Downloadable!]
  10. Omer Gokcekus & Amy Muedin, 2008. "Quantifying corruption by a human capital earnings equation," International Review of Economics, Springer, vol. 55(3), pages 243-252, September. [Downloadable!] (restricted)
  11. Osipian, Ararat, 2007. "Corrupt Organizational Hierarchies in the Former Soviet Bloc," MPRA Paper 7591, University Library of Munich, Germany. [Downloadable!]
  12. Eggers, Andy & Hainmueller, Jens, 2008. "MPs for Sale? Estimating Returns to Office in Post-War British Politics," MPRA Paper 7892, University Library of Munich, Germany. [Downloadable!]
  13. Kira Boerner & Christa Hainz, 2007. "The Political Economy of Corruption & the Role of Financial Institutions," William Davidson Institute Working Papers Series wp892, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  14. Osipian, Ararat, 2007. "“Feed from the Service”: Corruption and Coercion in the State—University Relations in Central Eurasia," MPRA Paper 10818, University Library of Munich, Germany. [Downloadable!]
  15. Osipian, Ararat, 2008. "Corruption of the Politicized University: Lessons from the Orange Revolution in Ukraine," MPRA Paper 11312, University Library of Munich, Germany. [Downloadable!]
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