Tatiana Karabchuk , Ruslan AlmuhametovNational Research University Higher School of Economicstkarabchuk@hse.ru

LSES workshop, Moscow 2013

1. Problem and motivation2. Research goal and tasks3. Literature review4. Data and methodology5. Results6. Conclusions

Fist stage analysis, bases on collected interviews, showed that there is a definite problem with ineffective wage setting in the police system in all four countries.

Policy makers, public authorities and police officers spoke about the same problem – low wage rates of policemen, reforms started (in Russia and Kazahstan). How are wages determined in Police?

From broad literature and mass media we know that both conventional and unconventional economic activities take place in police. Do low wages (non-satisfaction with payment) stimulate the growth of informal payments among policemen?

The main aim of the research is to disclose wage factors in 4 countries and identify the impact of inefficient wage on informal payment/activity (corruption approval).

The tasks are: To trace the wage distribution among policemen and disclose

its determinants. To reveal the impact of legal wage size on the attitudes

toward the informal activity (bribe-taking).

Two blocks of literature could be applied:

1) The first block contains papers on wage setting, wage factors, wage distribution as well as fair payments. This part of literature is much bigger and dates to 1950s

2) The second block comprises from all sort of informal economic behavior of policemen: conventional and unconventional. This part of literature is less thicker and dates to early 1960s

WAGE EFFICIENCY AND RENT SEEKING THEORIES Bhagwati and Srinivasan, Journal

of Political Economy, (1980). Shapiro and Stiglitz, American

Economic Review, (1984) Appelbaum and Katz, The

Economic Journal, (1987). Brown, Industrial and Labour

Relations Review, (1990) Nickell and Nicolitsas, Labour

Economics, (1997) Campbell and Kamlani, (1997) Ichino and Maggi, (2000) Lazear, The American Economic

Review, (2000) Chang and Ching-chong Lai,The

Scandinavian Journal of Economics, (2002)

CORRUPTION AND MOONLIGHTING BEHAVIOR

Becker , Journal of Political Economy,(1968)

Beck, Paul J., and Michael W. Mahe, Economic Letters, (1986)

Bayley and Shearing, Law & Society Review, (1996)

Braguinsky, Contemporary Economic Policy, (1996)

Tanzi, Staff Papers - International Monetary Fund (1998)

Anon , Jakarta Post, (2004) Ayling, and Grabosky,

International Journal of Police Strategies and Management, (2006)

Ayling and Shearing, Criminology and Criminal Justice, (2008)

Empirical research on police formal and informal payments is not so rich. There are several country studies that demonstrates very interesting and different results.

1. Bayley, 1996 (The Police and Political Development in Europe)2. Zvekic, 1998 (Countries in transition)3. Darryl D'Monte, 2000 (Asian societies and corruption)4. Beck & Ruth ,2002 (Attitudes to Corruption Amongst Russian

PoliceOfficers and Trainees)5. Tymoty Frye, 2002 (Police as an obstacle for business)6. Shleifer & Treisman, 2004 (Normal Country)7. Robertson, 2004 (Police reform in Russia)8. Wallace and Latcheva, 2006 (Corruption, Trust in Public

Institutions and the Informal Economy in Transition Countries of Central and Eastern Europe)

9. Ayling and Shearing, 2008 (Australia case of police corruption)10.Gerber, Mendelson, 2008 (Russian case of public abuse by police)

• Wages in police are regulated by the state and budget sector rules.

• The wage of a policeman usually consists of:– Formal basic payment according to the position and ranking;– Benefits for number or years;– Benefits for scientific position and rank;– Additional payments (surplus) for good work, difficulties

and etc.

The hypotheses for the wage determinants are coming from Mincerian wage equation, human capital theory, theory of compensating differences, budget sector mechanism

Data:Surveys of policemen conducted in 2011-2012 in

Bulgaria, Russia, Kazakhstan and Latvia (each country sample consists of 450-500 respondents).

Empirical results: Descriptive statistics of samples Wage and informal activity indicators Wage determinants (OLS regression for 4 countries) Bribery approval probability (marginal effects of probit

regressions for 4 countries)

Russia Kazakhstan Bulgaria Latvia

% of females employed 23.1 28.7 13.1 39.1

Average working hours per day 9.9 11.9 9.7 9.6

% with tertiary education 25.1 84.7 20.5 20.05

% of high-rank positioned 20.0 28.5 11.1 25.3

Average tenure in police 7.9 8.9 13.7 12.4

% of those working in the capital city of the country 8.9 22.1 20.3 42.2

Russia Kazakhstan Bulgaria Latvia

Average share of benefits in wages, % (St. dev)

13.2% (9.5)

8.17% (15.2)

5.7% (12.2)

14.2% (18.5)

Share of those who declare that could buy more on wage this year

10.4% 12.8% 1.83% 2.67%

Averages share of additional working policemen declared by themselves, % (St. dev)

35.8% (23)

32.1% (29)

24.9% (24.8)

50% (28)

Dependent variable: lnwage (corrected for minimum living spending in the region and for dollars PPP)

Independent variables: Gender Tenure in police Tenure in police squared Higher education Working hours Working experience (3 dummies) Number of years living in the city Level of position (3 dummies) Supervision of people (4 dummies) Departments (dummies )

Russia Latvia Kazakhstan Bulgaria Allgender -0.0429 0.0313* 0.0559 0.0559 0.0394*

tenure 0.0276* 0.00809** 0.0288*** 0.0182*** 0.0203***

tenure2 -0.000732 -0.000169 -0.000673* -0.000309* -0.000489***

higher_education 0.113 0.0485 -0.00977 0.236*** 0.115***

middle rank position 0.171* 0.140*** 0.144*** 0.0443 0.106***

high rank position 0.449*** 0.186*** 0.196*** 0.123** 0.207***

Supervision less than 10

-0.0305 0.0576** 0.108* 0.0423 0.0433

Supervision for 11-30 people

-0.0115 0.0882*** 0.0557 0.108** 0.0901**

Supervision for more than 30

0.000025 0.141*** -0.00630 0.0672 0.0894***

Working hours 0.00136 0.000179* 0.000341 0.000256 0.000331***

Russia Latvia Kazahstan Bulgaria All

W_exp priv_sect 0.0878 -0.0163 -0.00112 -0.0574* -0.000377

W_exp_state_sect 0.0506 -0.0397** -0.0801 0.0509* 0.00514

Investigation -0.00558 0.00619 -0.0348 0.116*** 0.0275

Internal services -0.0399 0.0685*** 0.0409 0.0427 0.0305

Security -0.0211 0.00401 0.0943 0 0.0305

Number of years in the city

0.00682** -0.000591 -0.00213 -0.00167* 0.000236

Latvia -0.214***

Kazakhstan -0.716***

Bulgaria 0.208***

_cons 6.147*** 6.544*** 5.952*** 6.731*** 6.571***

N 260 395 291 339 1285

R2 0.271 0.543 0.329 0.530 0.674

Hypotheses:

1. The bigger the family and the poor the family is more chances for approving corruption

2. The higher the real wage the less policemen approve bribery (wage satisfaction theory)

3. The higher the increase in wages (within two years of reforms) the less policemen approve bribery

4. The bigger the difference between real and ideal wage the more policemen approve bribery (A.Mas (2006) “Pay, Reference Points, and Police Performance”)

Is majority of your department consider acceptable that policemen take bribery

Negative attitude towards additional (informal) payments in police in your department

How the price for informal help from police is defined in the city?

Do you approve your colleague who declared corruption in your department?

Name_var

brib_accept negat_inf_p inf_help appr_br_decl

Yes 16.9 %(max 32,5% Kaz)

26.1%(max 40.8% Lat)

41% (max 63.6% Rus)

76.4 %(max 93.8 Bul)

No 83.%(max 94,9% Bul)

73.9%(max 85% Rus)

59%(max 76.8% Bul)

23.6 %(max 47,4% Kaz)

Dependent variables:

1. Bribery acceptance by majority of your department.

2. Negative attitude towards additional (informal) work of policemen.

3. Saying that the price for informal help is defined.

4. Proxy for bribery approval.

Independent tested variables:

• Size of family• Family well-being• Ln_wage• Wage increase for 2011-2010• Ln_wage difference ideal-real Controlls:

•Gender •Tenure in police/Tenure in police squared•Higher education•Past working experience •Number of years living in the city•Rank-position (3 dummies)•Supervision (4 dummies)•Departments (4 dummies)•Country

Russia Latvia Kazakhstan

Bulgaria All

tenure -0.130* 0.142 -0.0528 -0.134 -0.0263

middle rank position -0.0823 0.206 0.506 -1.735* 0.0235

supervision 0.528* 0.522 0.365 2.113* 0.361*

W_exp priv_sect 0.359 -0.191 0.0780 -1.412** -0.0412

W_exp_state_sect 0.139 -0.714** -0.246 -0.137 -0.167

Investigation -0.0859 -0.863** -0.209 -0.555 -0.335**

Internal services -0.0586 -0.666* -0.748* 0.540 -0.225

Family size n.s.Family well_being n.s.Ln_wage n.s.Wage increase -0.636** -0.476* -0.249 0.0739 -0.326**

Ln_difference_ideal_real n.s._ICNTRY_2 n.s._cons 0.141 -0.628 0.255 -3.775 0.348

N 227 284 165 236 948

PseudoR2 0.141 0.144 0.110 0.269 0.146

Russia Latvia Kazakhstan Bulgaria AllHigher education 0.838* -0.317 0.0467 0.380 0.0741Supervision -0.0493 0.698* -0.376 -0.247 0.280W_exp_state sector -0.287 -0.0783 0.650* 0.00107 0.120N_years in the city -0.0118 -0.0495** -0.00583 0.0160 -0.00102Family size 0.317** -0.0694 0.0102 0.0494 0.0294Family_well_being2 4.506*** 1.271* -1.426 -0.397 -0.0203Family_well_being3 4.972*** 1.177* -1.004 -0.672 -0.109Family_well_being4 5.143*** 0.990 -0.838 -0.887 -0.0455Ln_wage 0.803** -0.00291 0.618 0.954 0.741***

Wage increase n.s.Ln_difference_ideal_real n.s.Latvia 0.423Kazakhstan 0.878***

Bulgaria -0.0889_cons -10.03*** 0.248 -1.851 -6.392 -4.913**

N 229 271 152 185 841Pseudo R2 0.245 0.077 0.269 0.052 0.084

Russia Latvia Kazahstan Bulgaria All

gender 0.556 0.164 -0.224 0.897* 0.179

tenure -0.0263 0.0399 0.0558 -0.205* 0.00758

tenure2 0.00210 -0.00327 0.000703 0.00627* 0.000138

Supervision up to 10 0.370 0.796* 0.479 -1.102 0.280

Supervision more than 30 -0.201 0.444 0.112 -2.060* 0.0496

W_exp_private sector 0.313 0.304 0.116 -0.739* 0.115

W_exp_state sector 0.548* -0.363 -0.580 -0.500 -0.0617

N_years in the city -0.0338** -0.00237 -0.0253 0.0306** -0.00812

Family size 0.299* -0.00173 0.0713 -0.170 0.0293

Family well-being -4.338* 0.158 1.211 -1.141* -0.0425

Ln_wage n.s.Wage increase n.s.Ln_difference_ideal_real -0.446* 0.272 0.281 0.141 0.0346

Latvia -1.389**

Kazakhstan -0.727**

Bulgaria -1.180**

_cons 10.85 -5.100 1.270 -9.812 2.133

N 173 215 111 129 636

Pseudo R2 0.189 0.101 0.189 0.194 0.152

Russia Latvia Kazakhstan Bulgaria All

gender 0.471* 0.261 -0.260 0.537 0.166

tenure 0.0482 0.0602 0.133 -0.0716 0.0530*

Supervision -0.961* 0.715* 0.402 0.142

W_exp_private sector 0.187 0.179 0.792** 0.635 0.284*

W_exp_state sector 0.770*** 0.181 0.646* -0.00691 0.325**

Investigation 0.565* 0.487 -0.0350 0.171 0.230

Internal services 0.499* -0.0653 0.384 0.473 0.264*

Security 1.166* 0.408 0.740 0.607*

fam_size -0.0412 0.0611 0.0458 -0.256* 0.00218

Family well-being 0.0910 -6.352 -0.835 1.324* -0.00990

Ln_wage -0.478 0.159 -1.351** -0.124 -0.397*

Wage increase 0.0474 -0.0653 0.0879 0.395 0.138

Ln_difference_ideal_real 0.117 -0.267 -0.241 0.0139 -0.0962

Latvia -0.243

Kazakhstan -0.851***

Bulgaria 0.462

_cons 2.130 6.649 11.15** 2.235 3.758**

N 238 302 187 216 975

Pseudo R2

The main determinants for higher wages in police are: gender differences, tenure (+), tenure2 (-), Return to Education only in Bulgaria and positive effect of working hours

only for Latvia. Return to high rank in all countries, Return to supervision only in Bulgaria and Latvia, Regional difference in Russia and less in Kazahstan Department differences in Bulgaria and Latvia

Policemen are better paid in Bulgaria in comparison to Russia and less paid in Latvia and Kazakhstan

Almost no real changes in wages in Russia, growth in wages in Kazakhstan , decrease in real wages in Latvia and Bulgaria

Opportunities for additional work have decreased during the last 2 years for:

33.5% in Latvia 35% in Russia

50% in Kazakhstan 70% in Bulgaria.

1. The poor family budget positively affects corruption approval from policemen

2. The hypothesis about the direct effect of wage size proved to be true only for Russia

3. The hypothesis about wage increase within the two years of reforms was not confirmed for all countries.

4. The hypothesis of positive effect of real-ideal wage difference was shown to be true only for Russia. What about other countries?

??? Values, culture, social norms???

next step for research

24. Какова Ваша заработная плата в полиции: сколько примерно денег вы получали на руки (включая премии, доплаты и надбавки, которые Вам платят в полиции) в среднем в месяц за 2011 год?

28. Как Вы считаете, сколько примерно должен получать человек на вашей должности?

30. Как относятся к дополнительным заработкам сотрудники Вашего подразделения?

38. Насколько приемлемой большинство Ваших коллег в подразделении сочтет следующую деятельность (позицию)? Полицейский получил взятку

39. Предположим, Вы узнаете, что один из Ваших коллег сообщил в службу внутренней безопасности о коррупции в вашем подразделении, как Вы к этому отнесетесь?