Front Matter Page Research Department Authorized for distribution by Vito Tanzi and Peter Wickham Contents Summary I. Introduction II. Theoretical Background A. General Framework Shirking–corruption in a maximizing framework, complemented by societal standards Fair wages–corruption in a satisficing framework B. Specific Implications Fair wage–corruption hypothesis Shirking hypothesis III. Empirical Implementation, Defining Corruption and its Causes A. Dependent Variable, Definition of Corruption B. Independent
obtains: EI = ( 1 − pC ) ( CB + W g ) + pC ( W p − f ) ) ( 4 ) This equation will be the basis for the analysis which follows. What we will call the “fair wage–corruption” hypothesis is the hypothesis that workers choose levels of C in an attempt to reach EI=EI * . EI = ( 1 − pC ) ( CB + W g ) + pC ( W p − f ) ) = EI
control variables. The upper range is difficult to reconcile with the conceivable level of fair wages, casting doubt on the fair wage-corruption hypothesis. It is, however, important to recall that few countries had high civil-service wages so that the hypothesis that corruption is (close to) zero for that wage range cannot be tested directly; the results rely instead on extrapolation of a linear relationship estimated for low relative wages. And as shown in Appendix B , behavior under the fair-wage hypothesis can “collapse” to that under the shirking hypothesis when