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Institutionalized Public Sector Corruption:a Legacy of the Soeharto Franchise

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  • Ross H. McLeod

Abstract

Attempts to maintain prices different from those that would otherwise be determined by supply and demand are virtually guaranteed to result in illegal behaviour, including in the case of laws that determine the salaries of civil servants. In Indonesia, private sector salaries are highly progressive with respect to increasing levels of responsibility, whereas the civil service structure is very flat, resulting in an enormous gap between private and public sector salaries at higher levels of management. As a consequence, informal--and often illegal--income generating practices are observed that make public sector careers far more attractive than formal remuneration levels would suggest. It is argued here that it is unhelpful to view endemic corruption simply in terms of unprincipled behaviour. Rather, it is best understood in terms of institutional weakness in the form of continued reliance on entrenched personnel management practices from the Soeharto era that deliberately ignored market realities.

Suggested Citation

  • Ross H. McLeod, 2010. "Institutionalized Public Sector Corruption:a Legacy of the Soeharto Franchise," Departmental Working Papers 2010-02, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2010-02
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2010/wp_econ_2010_02.pdf
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    Cited by:

    1. Korte, Nina, 2011. "It's Not Only Rents: Explaining the Persistence and Change of Neopatrimonialism in Indonesia," GIGA Working Papers 167, GIGA German Institute of Global and Area Studies.

    More about this item

    Keywords

    franchise; Indonesia; rents; private taxation; bureaucratic extortion;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects

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