A market for integrity - The use of competition to reduce bribery in education

Abstract

Bribery to attain academic credentials is a common problem in Eastern European and in developing countries. It presents a major challenge because it reinforces inequality and lays the foundation for a culture that undermines skill, achievement, and productivity. One recommended solution is to raise teacher salaries. Even without monitoring and punishment, this could ameliorate the situation by moving teachers away from the poverty threshold and shifting the balance of decision-making forces in favour of intrinsically prosocial motives. As an alternative solution, we suggest a piece-rate scheme that rewards teachers for the students they attract to their schools. Using a game theoretic model and a pre-registered experiment, we compared the two mechanisms. Our results show that a salary increase has little or no impact on bribery, but the piece rate substantially reduces it. The piece rate does this by creating a market that transfers power from teachers to students and thus recruits endogenous forces to discipline the corrupt. These findings provide initial evidence for the value of correctly incentivising integrity. Interventions inspired by these findings would be best implemented in cases where the government cannot reliably monitor and enforce anti-corruption measures.

Keywords: education, corruption, theory, experiment

JEL Classification: D73, D82, C90