This paper presents what is to our knowledge the first empirical estimate of the effect of pay in the civil service on corruption. First, we show that theory is ambiguous on the relationship between civil-service pay and corruption. Then, we examine the issue using a new data set on wages for low-income countries. We find evidence of a statistically and economically significant relationship between relative civil-service pay and corruption in regressions based on cross-country averages, where we control for a wide array of variables. The relationship implies that a rather large increase in wages is required to eradicate corruption solely by raising wages.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.