Abstract
Empirical studies have yielded conflicting findings regarding the impact of official wages on corruption. Based on Efficiency Wage Theory and Public Value Theory, this study posits that one contributing factor to such conflict is the failure to discern between petty and grand corruption. This study expands these theories from two perspectives. Firstly, we contend that increasing official wages leads to decreased petty corruption but not grand corruption. Secondly, we propose that the impact of higher official wages weakens when officials earn more than those employed in the private sector. The two hypotheses are validated on our original Chinese corruption dataset via instrumental variable estimations. This study implies that attempting to reduce grand corruption through increasing official wages would incur significant costs with low returns. However, enhancing public sector wages to match those in the private sector could be a strategy to mitigate petty corruption.
Published Version
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