Efficiency wage model. In 2010, Ghana introduced a new pay structure resulting in police pay doubling....

Efficiency wage model. In 2010, Ghana introduced a new pay structure resulting in police pay doubling. Police officers became more corrupt after this salary increase. How might you account for this?

Expert Solution

The idea of the efficiency wage theory is that increasing wages can lead to increased labour productivity because workers feel more motivated to work with higher pay.Therefore if firms increase wages – some or all of the higher wage costs will be recouped through increased staff retention and higher labour productivity.

According to this model, the corruption mist decrease in the economy after increasing the Payment.

But since in the case of Ghana it is see as opposite, that is the corruption increased with increase in Police salary. The possible reason for this opposite effect may be that with increase in salary the living standard of policeman increased. Higher wages led to increase their standard of living and now they fell that if they have more money they can live a more luxurious life and hence they try to earn more by corruption. Before increase in salary, they were adapted to live at a low standard of living bit after the salary increase they can uplift themselves a bit so they are motivated to uplift more.

Rahul Sunny answered 2 years ago

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