High-quality data on state-level inequality and incomes, panel data on corruption convictions, and careful attention to the consequences of including or excluding fixed effects in the panel specification allow us to estimate the impact of income considerations on the decision to undertake corrupt acts. Following efficiency wage arguments, for a given institutional environment the corruptible employee’s or official’s decision to engage in corruption is affected by relative wages and expected tenure in the public sector, the probability of detection, the cost of fines and jail terms, and the degree of inequality, which indicate diminished prospects facing those convicted of corruption. In US states over 25 years we show that inequality and higher government relative wages significantly and robustly produce less corruption. This reverses other findings of a positive association between inequality and corruption, which we show arises from long-run joint causation by unobserved factors.
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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number
08-02.
Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption P48 - Economic Systems - - Other Economic Systems - - - Other Economic Systems: Political Economy; Legal Institutions;
Property Rights
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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.:
Rafael La Porta & Florencio Lopez-de-Silanes & Cristian Pop-Eleches & Andrei Shleifer, 2004.
"Judicial Checks and Balances,"
Journal of Political Economy,
University of Chicago Press, vol. 112(2), pages 445-470, April.
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Rafael LaPorta & Florencio Lopez-de-Silane & Christian Pop-Eleches & Andrei Shleifer, 2003.
"Judicial Checks and Balances,"
NBER Working Papers
9775, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)