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This paper mainly focuses
on decisions taken by politicians that may affect the level of
municipal corruption. Specifically, we study whether local
politicians’ incentives to be corrupt are influenced by the
wages they receive and/or their intention to run for next
elections. This issue has hardly been empirically tackled before
at local level.
A major problem in every
political system is that politicians in office may use their
power to pursue their own interests, rather than those of
citizens. Politicians are in a position that allows them to
divert public funds into their own pockets. In fact, it has been
claimed that policymakers seek power, ego-rents and even bribes.
Transparency
International defines corruption as the abuse of entrusted power
for private gain. Corruption generally comprises illegal
activities, which mainly come to light only through scandals,
investigations or prosecutions. Although previous studies have
explored several factors of corruption, most of them have been
conducted at national levels. In fact, the European
Commission considers that no comprehensive approach of
corruption has been developed at regional and local levels.
The
evaluation of corruption is more complex at the regional and
local level. There are three principal approaches to measure
corruption at the macro level: (1) general or target-group
perception (2) incidence of
corruptive activities
and (3) bribes reported, the number of prosecutions
brought or court cases directly linked to corruption. The first kind of measures reflects
the feeling of the public or a specific group of respondents
about corruption. The second approach is based on surveys among
those who potentially bribe and those whom bribes are offered.
The third kind of measures groups more objective variables that
are also used as indicators of corruption levels. However, at
local level, the difficulty of measuring corruption levels
through any of these approaches has become a major obstacle due
mainly to the limited availability of surveys and database
needed to measure corruption in a proper way. For this reason,
as stated above, while numerous have examined the determinants
of corruption in an international comparative approach,
municipal research on this issue is more scarce.
According
to researchers
as in all organizational contexts, an agency problem exists
between elected officials and voters. Voters, principals, elect
a politician, agent. The interests of politicians and voters are
not perfectly aligned, so politicians in office may use their
power to pursue their own interests, rather than those of the
citizens. Researchers model this
political agency problem as one of rent extraction. Voters pay
taxes to fund public goods that are provided by politicians with
uncertain costs. Given that politicians know these costs, they
take advantage of this information asymmetry by extracting rents
from the tax collected for personal benefit, which reduces the
funds available for supplying public goods. Therefore, voters’
utility decreases as the amount of rents extracted increases.
Although
all of the ways of obtaining political rents can be seen as
unethical, only some of them actually are illegal. According to
Transparency International, corruption is defined as the abuse
of entrusted power for private gain through illegal activities.
This abuse of entrusted power by politicians through corruption
is a threat to many modern democracies. However, while the
pervasive effects of corruption have been well documented, the
root causes are poorly understood.
Some
recent empirical studies have explored the determinants of
corruption, most of them at national levels. Furthermore,
several of these factors have not been analyzed in depth. For
example, while there are convincing theoretical arguments why
political decisions affect corruption, the empirical evidence is
rather scarce. Below, we present the literature on two main
decisions taken by municipal politicians that may affect the
level of corruption: politicians’ wages and their intention to
run for next elections.
Efficiency
wage theories posit that higher levels of pay induce higher
productivity. This effect can be explained by three different
efficiency models. First, sociological models postulate that
employees who believe they are overpaid (comparing their wages
with those of comparable employees) are more likely to work
harder and be more. Second, the shirking model suggests that
employees overpaid exert effort and avoid improper behaviour so
as to retain their jobs and continue earning above-market rents.
While the first two arguments are due to motivation reasons, the
third argument is based on the selection model. This model
argues that firms have imperfect information about worker
abilities, thus they may attract higher quality employees by
offering higher wages.
All these models support
the idea that a wage increase fosters employees’ productivity. Reseachers
complement the efficiency wages theories by examining the impact
of relative wages on employee theft. Thus, they predict that
relatively higher wages will discourage employee theft for two
reasons: first, employees receiving relatively higher wages are
less inclined to commit theft as they attempt to reciprocate
positively to their employers and/or to retain their high-paying
jobs (motivation mechanism); second, firms that offer relatively
higher wages may attract a higher proportion of honest workers
(selection mechanism). Researchers also contribute to the
management control literature that examines the effects of
control mechanisms on employee behavior. Thus, higher wages can
provide an alternative mechanism to deter fraudulent behaviour,
beyond other honesty inducing control mechanisms studied in the
accounting and control literature.
However,
not all politicians respond in the same way to the same
incentives. Thus, regardless of the wage level, some politicians
might be corrupt because of their own psychological or moral
makeup, or because some of the bribes offered may be too large
for some politicians to resist. In this sense, the fight against
corruption pursued exclusively on the basis of wage increases
can be very costly to the budget of a municipality, which may
not be welcomed by citizens, and can achieve only part of the
objective, since despite high wages, some individuals may
continue to engage in corrupt practices
Extending
efficiency wage theories to the public sector, state that
paying politicians more could also improve their performance
(productivity) for different reasons. First, politicians’
morale could increase as their wages rise (sociological models).
Second, paying politicians better may increase their performance
because of their need to hold office (shirking model) Finally,
higher wages will attract more quality citizens into politics
(selection model).
Editor
WikiLeaks Sudbury
October 2018
Note: This
article originally published on Spanish
Accounting Review 21 (1) (2018) 19–27. Brief
overview and excerpts of the articles and concepts are noted above.
Reference
Benito
at al (2018). Can salaries and re-election prevent political
corruption? An empirical evidence, Spanish
Accounting Review 21 (1) (2018) 19–27.
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