This paper reports on an experiment of corruption that was conducted in two treatments: one with the possibility of detection and one without. It turns out that monitoring reduces corruption through deterrence; at the same time, it destroys the intrinsic motivation for honesty. Thus the net effect on overall corruption is a priori undetermined.We show that the salary level has an influence on corruption through increased opportunity costs of corruption, but fail to find evidence for a ’payment satisfaction’ effect. Interesting policy conclusions emerge.
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