Corruption in Russia

In a recent study, co-authored with Bambang Suharnoko Sjahrir and Nikita Zakharov, Günther G. Schulze has determined a strong causal non-linear relationship between the relative salary of public officials in Russia and the number of corruption incidents as registered by the police or as convicted by the courts. Salary raises reduce corruption at low and medium relative salary levels with diminishing returns up to a turning point after which corruption rises again. Corruption is lower in better educated regions and in those with lower inequality. Increasing coverage of local TV stations also reduces corruption levels. The researchers' results suggest that transparency may enhance accountability, at least to some extent. More effective law enforcement and higher long-term unemployment rates increase the expected costs of corruption and thus reduce corruption levels. Their results have important implications for policy formation. While raising public officials' salaries may be an integral part of an anti-corruption reform, it is no silver bullet. Salary adjustments may not only be costly in monetary terms, they need to be carefully designed with the proper reference salary identified to avoid increasing corruption when the goal is the opposite.

During his stay at CESifo Mr Schulze he plans to finalise a paper on the effect of decentralisation on public service delivery in Indonesia, in which he analyses whether the newly gained freedom of local jurisdictions to provide local services has led to an improvement of overall performance and whether there is a pattern of heterogeneous performance behind the aggregate assessment. In particular, he seeks to understand whether decentralisation has led to a (conditional) divergence or convergence in the performance of Indonesia’s districts. Another project will be concerned with the relationship between terrorism and refugee flows.

Mr Schulze's research areas include international economics, political economy, development economics and the economics of terrorism and conflict. He recently finalised a paper in which he and his coauthors showed that access to clean water and proper sanitation give rise to very sizeable growth dividends. The authors use a set of novel hydrological variables to address obvious endogeneity concerns and show that their results are very robust with respect to potentially confounding factors.

Günther Schulze is Professor of Economics at the Institute of Economic Research of the University of Freiburg and co-director of the Freiburg Institute for Advanced Studies. He studied in Hamburg, Konstanz and Stanford, receiving his PhD from the University of Konstanz with a dissertation: The Political Economy of Capital Controls (Cambridge University Press, 2000). His Habilitation was entitled: "Sustainability Impact Assessment with Computable General Equilibrium Models" and examined various topics in international economics.