Do higher government wages reduce corruption? This column argues that they do, but only in relatively poor countries. When a country’s poor, higher government wages reduce bureaucrats’ incentive to extract illegal incomes. However, as income per capita rises, higher government wages gradually lose their effectiveness in combating corruption.
Defined as the abuse of public office for private gain, corruption is found to have bad effects on economic development, weaken the institutional system and create cynicism in the political life (Rose-Ackerman 2004). Quite a few economists have been troubled with the question of whether government wages should be used as a means to reduce the ‘gains’ from corrupt activities, and thus, breaking the vicious circle of high corruption and economic stagnation. However, there is very little agreement on the actual impact of government wages on corruption.
See full Article: http://www.voxeu.org/article/higher-government-wages-may-reduce-corruption
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