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Public Sector Pay and Corruption: Measuring Bribery from Micro Data

58 Pages Posted: 22 Feb 2006  

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Klara Sabirianova Peter

University of North Carolina - Chapel Hill; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

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Date Written: February 14, 2006

Abstract

This study is the first to provide a systematic measure of bribery using micro-level data on reported earnings, household spending and asset holdings. We use the compensating differential framework and the estimated sectoral gap in reported earnings and expenditures to identify the size of unobserved (unofficial) compensation (i.e., bribes) of public sector employees. In the case of Ukraine, we find that public sector employees receive 24-32% less wages than their private sector counterparts. The gap is particularly large at the top of the wage distribution. At the same time, workers in both sectors have essentially identical level of consumer expenditures and asset holdings that unambiguously indicate the presence of non-reported compensation in the public sector. Using the conditions of labor market equilibrium, we develop an aggregate measure of bribery and find that the lower bound estimate of the extent of bribery in Ukraine is between 460 mln and 580 mln U.S. dollars (0.9-1.2% of Ukraine's GDP in 2003).

Keywords: wage, wage differentials, public sector, corruption, bribery, Ukraine

JEL Classification: J3, J4, O1, P2

Suggested Citation

Gorodnichenko, Yuriy and Sabirianova Peter, Klara, Public Sector Pay and Corruption: Measuring Bribery from Micro Data (February 14, 2006). IZA Discussion Paper No. 1987; Andrew Young School Research Paper No. 06-05. Available at SSRN: https://ssrn.com/abstract=884322

Yuriy Gorodnichenko (Contact Author)

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://www.econ.berkeley.edu/~ygorodni/index.htm

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Klara Sabirianova Peter

University of North Carolina - Chapel Hill ( email )

Chapel Hill, NC 27599
United States

HOME PAGE: http://www.unc.edu/~kpeter

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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