Corruption: The influence of government wages on corruption.

People consider corruption as one of the biggest problems in the world, nonetheless there is still no effective solution for corruption. In the battle against corruption, international organizations frequently suggest higher wages in the civil service. Several authors have been investigating the relationship between the payment of higher wages and corruption, however the results are not sufficient. This thesis contributes to the existing literature by investigating the two important theories on how government wages can eliminate corruption, respectively the shirking hypothesis and the fair-wage hypothesis. I tested the fair-wage hypothesis empirically and found robust evidence that increasing government wages has a significant positive influence on corruption in developing countries. Furthermore, I designed an experiment to investigate the shirking hypothesis, however I was not able to execute the actual experiment due to limited funding. I conducted a questionnaire and found suggestive evidence that students have a higher incentive to cheat when they assume that they are anonymous, while they have a higher incentive to be honest when they assume that they are being monitored. The findings of this paper confirm that government wages have an influence on corruption.