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Institutionalized Public Sector Corruption:a Legacy of the Soeharto Franchise

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  • Ross H. McLeod

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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.

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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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Bibliographic Info

Paper provided by The Australian National University, Arndt-Corden Department of Economics in its series Departmental Working Papers with number 2010-02.

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Length: 34 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:pas:papers:2010-02

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Related research

Keywords: franchise; Indonesia; rents; private taxation; bureaucratic extortion;

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

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