Does the Wage Gap between Private and Public Sectors Encourage Political Corruption?
We present a dynamic network model of corrupt and noncorrupt employees representing two states in the public and private sector. Corrupt employees are more connected to one another and are less willing to change their attitudes regarding corruption than noncorrupt employees. This behavior enables them to prevail and become the majority in the workforce through a first-order phase transition even though they initially represented a minority. In the model, democracy-understood as the principle of majority rule-does not create corruption, but it serves as a mechanism that preserves corruption in the long run. The motivation for our network model is a paradox that exists on the labor market. Although economic theory indicates that higher risk investments should lead to larger rewards, in many developed and developing countries workers in lower-risk public sector jobs are paid more than workers in higher-risk private sector jobs. To determine the long-run sustainability of this economic paradox, we study data from 28 EU countries and find that the public sector wage premium increases with the level of corruption.
Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, United States of America; Faculty of Civil Engineering, University of Rijeka, 51000 Rijeka, Croatia; Faculty of Economics, University of Ljubljana, 1000 Ljubljana, Slovenia; Zagreb School of Economics and Management, 10000 Zagreb, Croatia; Adriatic Economic Association, 10000 Zagreb, Croatia; Luxembourg School of Business, Luxembourg.
Boris
B
Podobnik
Zagreb School of Economics and Management, 10000 Zagreb, Croatia; Adriatic Economic Association, 10000 Zagreb, Croatia; Adam Smith Institute, 23 Great Smith Street, London, United Kingdom.
Vuk
V
Vukovic
Center for Polymer Studies and Department of Physics, Boston University, Boston, MA 02215, United States of America.
H Eugene
HE
Stanley
D003415:Crime / Q000523:psychology / Q000706:statistics & numerical data*; D004651:Employment / Q000941:ethics / Q000706:statistics & numerical data; D005062:European Union; D006801:Humans; D011057:Politics; D017149:Private Sector / Q000191:economics / Q000941:ethics*; D017150:Public Sector / Q000191:economics / Q000941:ethics*; D012044:Regression Analysis; D012456:Salaries and Fringe Benefits / Q000639:trends*