Question

What are the high road and low road in stopping corruption in a developing country

Answer 1

Bureaucrat’s Decision Problem: the Role of Compensation, Selection, and Other
Incentives
(i) Compensation
Despite the attention often given to civil service wages, there is relatively little evidence on
their impact. Several cross-country studies find that higher public wages are associated with
lower corruption, though these studies are essentially cross-sectional in nature. For instance, in a
cross-section of 31 low-income countries, Van Rijkenghem and Weder (2001) find that a
doubling of government relative to manufacturing wages is associated with only 0.5 point
reduction in ICRG corruption index measured on a scale from 0 to 6. Meanwhile, Rauch and
Evans (2000) find that the level of bureaucratic wages are significant in explaining only one of
the five measures of bureaucratic performance, namely that a 1 standard deviation increase in
salary is associated with an improvement of 0.5 standard deviation in the bureaucratic delay
index measured on a range from 1 to 4.
With regard to more micro evidence, Di Tella and Schargrodsky (2004) test the efficiency
wage idea by looking at a corruption crackdown in Buenos Aires hospitals’ procurement
departments. They examine the impact of increasing the probability of detection and examine
heterogeneous impacts on the prices paid for basic inputs based on the level of wages.