New paper published: Does the wage gap between public and private sectors encourage corruption?

The Adriatic Economic Association is proud to announce their first paper being published at the multidisciplinary journal PLOS ONE (IF=3.54).

It was a joint collaboration between three AEA members that has led to this publication.
The full citation is Podobnik B, Vukovic V, Stanley HE (2015) “Does the Wage Gap between Private and Public Sectors Encourage Political Corruption?” PLoS ONE 10(10): e0141211. doi:10.1371/journal.pone.0141211

The paper is primarily a theoretical one focused on designing a model of corruption networks in democracies. The intuition for the model was a growing disparity between public sector and private sector wages and how this corresponds with greater corruption. This is, naturally, only a correlation, but it served as a motivation to search deeper and uncover how corrupt networks can sustain themselves within a democratic environment.There were three main findings/contributions in the paper:

  1. The greater the public sector wage premium (higher public sector wages than private sector wages) in a given country, the greater the possibility of corruption
  2. We design and propose a new reward-to-risk ratio for labor economics (taking into account the relative riskiness of working in each sector)
  3. Democracy does not create corruption, but it can serve as a mechanism to preserve it in the long run. A transition from a corrupt to a non-corrupt state, and vice-versa, can only be purely random.

See the full open-access paper here.