• Chart of the Week
  • December 23, 2019

You can’t buy honesty

Danish Royal Guards stand outside Amalienborg Castle in Copenhagen.

jirivondrous

Denmark is the least corrupt country in the world, its Ministry of Foreign Affairs declares. It consistently tops Transparency International’s Corruption Perception Index.  And while the country isn’t perfect, the government manages to attract an honest workforce that rarely takes bribes or kickbacks.

The fact that they pay their public servants less than private sector wages could be part of the reason, according to a paper in the November issue of the American Economic Journal: Economic Policy.

Authors Sebastian Barfort, Nikolaj Harmon, Frederik Hjorth, and Asmus Leth Olsen found that Danish students who were less likely to cheat when given a task were also more likely to be attracted to the public sector.

The researchers ran a series of experimental games at the University of Copenhagen in which students could make more money if they lied to their peers. 

Figure 4 from their paper shows how dishonesty varied with student preferences for the public and private sectors.

 

 

Figure 4 from Barfort, et al. (2019)

 

The x-axis indicates hypothetical wage scenarios that students were asked about. In the far left scenario, the public sector wage is 20,000 Danish krone ($3,333) more per month than the private sector wage. On the far right, it’s the reverse; the private sector wage premium is Dkr 20,000.

The black columns represent the average cheat rate among students who would choose the private sector. And the grey columns represent the students who would chose the public sector.

The rightward divergence between the columns shows that when students believed a job in the private sector would pay more, the less honest students were deterred from government service and the more honest students were drawn to it. 

For instance, when private sector wages were set at Dkr 5,000 over the public sector—roughly Denmark’s current public-private wage gap—students who preferred government work were 9 percentage points less likely to cheat than their counterparts.

The authors’ results reflect Denmark’s unique circumstances, so decreasing government wages in poorer, more corrupt countries may not be a solution. But the research offers insights into why some countries are able to maintain honest public sectors, while other countries struggle with corruption.