Inequality and Corruption: Evidence from US States
Publikation: Working paper › Forskning
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Inequality and Corruption : Evidence from US States. / Alt, James E.; Lassen, David Dreyer.
Economic Policy Research Unit. Department of Economics, University of Copenhagen, 2008.Publikation: Working paper › Forskning
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RIS
TY - UNPB
T1 - Inequality and Corruption
T2 - Evidence from US States
AU - Alt, James E.
AU - Lassen, David Dreyer
N1 - JEL classification: D72, D73, P48
PY - 2008
Y1 - 2008
N2 - High-quality data on state-level inequality and incomes, panel data on corruption convictions, and careful attention to the consequences of including or excluding fixed effects in the panel specification allow us to estimate the impact of income considerations on the decision to undertake corrupt acts. Following efficiency wage arguments, for a given institutional environment the corruptible employee's or official's decision to engage in corruption is affected by relative wages and expected tenure in the public sector, the probability of detection, the cost of fines and jail terms, and the degree of inequality, which indicate diminished prospects facing those convicted of corruption. In US states over 25 years we show that inequality and higher government relative wages significantly and robustly produce less corruption. This reverses other findings of a positive association between inequality and corruption, which we show arises from long-run joint causation by unobserved factors.
AB - High-quality data on state-level inequality and incomes, panel data on corruption convictions, and careful attention to the consequences of including or excluding fixed effects in the panel specification allow us to estimate the impact of income considerations on the decision to undertake corrupt acts. Following efficiency wage arguments, for a given institutional environment the corruptible employee's or official's decision to engage in corruption is affected by relative wages and expected tenure in the public sector, the probability of detection, the cost of fines and jail terms, and the degree of inequality, which indicate diminished prospects facing those convicted of corruption. In US states over 25 years we show that inequality and higher government relative wages significantly and robustly produce less corruption. This reverses other findings of a positive association between inequality and corruption, which we show arises from long-run joint causation by unobserved factors.
KW - Faculty of Social Sciences
KW - rent seeking
KW - Gini coefficient
KW - efficiency wage
KW - public sector wages
M3 - Working paper
BT - Inequality and Corruption
PB - Economic Policy Research Unit. Department of Economics, University of Copenhagen
ER -
ID: 5731544