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Is the Efficiency Wage Efficient? The Social Norm and Organizational Corruption

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  • Chang, Juin-jen
  • Lai, Ching-chong

Abstract

The effectiveness of efficiency wage incentives is often jeopardized by perverse organizational corruption. We model organizational corruption as a phenomenon of social interaction and relate the substantial psychological role characterizing the social norm to the corruption problem. We find that if the status quo bribery rate within the firm is high, social norms can no longer serve as a sufficient sanction against a corrupt supervisor; pandemic organizational corruption tends to generate a critical mass effect--the snowball effect--which intensifies the corruption effect. This intensified effect, due to the snowballing character of social norms, may more than offset the usual incentive effect of wages, resulting in more widespread shirking in the firm. Copyright 2002 by The editors of the Scandinavian Journal of Economics.

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  • Chang, Juin-jen & Lai, Ching-chong, 2002. " Is the Efficiency Wage Efficient? The Social Norm and Organizational Corruption," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 27-47.
  • Handle: RePEc:bla:scandj:v:104:y:2002:i:1:p:27-47
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    Cited by:

    1. Rotondi, Valentina & Stanca, Luca, 2015. "The effect of particularism on corruption: Theory and empirical evidence," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 219-235.
    2. Maggian, Valeria & Montinari, Natalia & Nicolò, Antonio, 2015. "Backscratching in Hierarchical Organizations," Working Papers 2015:10, Lund University, Department of Economics.
    3. Davis, Jon S. & Pesch, Heather L., 2013. "Fraud dynamics and controls in organizations," Accounting, Organizations and Society, Elsevier, vol. 38(6), pages 469-483.
    4. R. Mark R. Isaac & Douglas A. Norton, 2011. "Just the Facts Ma'am: A Case Study of the Reversal of Corruption in the Los Angeles Police Department," Working Papers wp2011_08_01, Department of Economics, Florida State University.
    5. Van-Ha Le & Jakob de Haan & Erik Dietzenbacher, 2013. "Do Higher Government Wages Reduce Corruption? Evidence Based on a Novel Dataset," CESifo Working Paper Series 4254, CESifo Group Munich.
    6. Timofeyev, Yuriy, 2015. "Analysis of predictors of organizational losses due to occupational corruption," International Business Review, Elsevier, vol. 24(4), pages 630-641.
    7. Jamie-Lee Campbell & Anja Göritz, 2014. "Culture Corrupts! A Qualitative Study of Organizational Culture in Corrupt Organizations," Journal of Business Ethics, Springer, vol. 120(3), pages 291-311, March.

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