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The Impact of an Unexpected Wage Cut on Corruption: Evidence from a "Xeroxed" Exam

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  • Borcan, Oana

    () (University of Gothenburg)

  • Lindahl, Mikael

    () (University of Gothenburg)

  • Mitrut, Andreea

    () (University of Gothenburg)

Abstract

This paper aims to understand how corruption responds to financial incentives and, in particular, it is an attempt to identify the causal impact of a wage loss on the prevalence of corruption in the education sector. Specifically, we exploit the unexpected wage cut in May 2010 that affected all Romanian public sector employees, including the public education staff, and examine its effect on students' scores on the high-stakes national exam which occurs at the end of high school – the Baccalaureate. To exploit the effect of an income shock on corruption, we use a difference-in-difference strategy and compare the change in the exam outcomes between the public schools – the treatment group – and the private schools – the control group, which were unaffected by the wage cut. Our findings suggest that the wage loss led the public schools to have better exam outcomes than the private schools in 2010 relative to 2009. We attribute this difference to the increased involvement in corrupt activities by public school staff, which was driven by financial incentives. These results match an unprecedentedly high number of allegations of fraud and bribery against school principals, which earned the 2010 Baccalaureate the title of the Xeroxed exam – akin to identical test answers found to have been distributed to numerous students.

Suggested Citation

  • Borcan, Oana & Lindahl, Mikael & Mitrut, Andreea, 2012. "The Impact of an Unexpected Wage Cut on Corruption: Evidence from a "Xeroxed" Exam," IZA Discussion Papers 6646, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6646
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:wdevel:v:105:y:2018:i:c:p:171-188 is not listed on IDEAS
    2. Mavisakalyan, Astghik & Meinecke, Juergen, 2016. "The labor market return to academic fraud," European Economic Review, Elsevier, vol. 82(C), pages 212-230.
    3. Hinnerich, Björn Tyrefors & Vlachos, Jonas, 2017. "The impact of upper-secondary voucher school attendance on student achievement. Swedish evidence using external and internal evaluations," Labour Economics, Elsevier, vol. 47(C), pages 1-14.
    4. Oana Borcan & Mikael Lindahl & Andreea Mitrut, 2017. "Fighting Corruption in Education: What Works and Who Benefits?," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 180-209, February.
    5. Joël CARIOLLE, 2014. "Corruption in Turbulent Times: a Response to Shocks?," Working Papers P106, FERDI.
    6. Joël CARIOLLE, 2016. "The voracity and scarcity effects of export booms and busts on bribery," Working Papers P146, FERDI.
    7. repec:eee:joepsy:v:63:y:2017:i:c:p:1-16 is not listed on IDEAS

    More about this item

    Keywords

    high-stakes tests; bribes; school principals;

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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