The impact of an unexpected wage cut on corruption: Evidence from a “Xeroxed” exam

Abstract

This paper aims to understand how corruption responds to financial incentives and, in particular, it is an attempt to identify the causal impact of a wage loss on the prevalence of corruption in the education sector. Specifically, we exploit the unexpected wage cut in May 2010 that affected all Romanian public sector employees, including the public education staff, and examine its effect on students' scores on the high-stakes national exam which occurs at the end of high school-the Baccalaureate. To exploit the effect of an income shock on corruption, we use a difference-in-difference strategy and compare the change in the exam outcomes between the public schools-the treatment group-and the private schools-the control group, which were unaffected by the wage cut. Our findings suggest that the wage loss led the public schools to have better exam outcomes than the private schools in 2010 relative to 2009. We attribute this difference to the increased involvement in corrupt activities by public school staff, which was driven by financial incentives. These results match an unprecedentedly high number of allegations of fraud and bribery against school principals, which earned the 2010 Baccalaureate the title of the Xeroxed exam-akin to identical test answers found to have been distributed to numerous students. ‡

Fighting Corruption in Education: What Works and Who Benefits?

“…This made the university admission exams less relevant as the Baccalaureate scores attained increasing shares in the admission criteria (up to 100 percent), raising the stakes of the high school exit exam. The combination of the high stakes and poor remuneration of public school teachers created an endemic corruption environment surrounding the Baccalaureate exam, as also documented by Borcan, Lindahl, and Mitrut (2014).…”

“…Where installed, the cameras were placed in the front of the room and on the hallways, and the camera footage was collected and screened by the county inspectorates. 13 For a more detailed treatment of the state of corruption in Romania, particularly in the education system, see Borcan, Lindahl, and Mitrut (2014). Based on PISA test scores, the authors also document the strong contrast between national exam scores and true ability compared with other European countries.…”

“…Particularly, we investigate the efficiency and distributional consequences of a national anticorruption campaign targeting the Romanian high school exit examthe Baccalaureate. 1 The campaign was initiated in 2011 in response to the 2010 Baccalaureate, which marked a peak in corruption for exam grades and generated a media storm after the Romanian National Anticorruption Directorate revealed how batches of identical answers had been distributed to students by public teachers (see Borcan, Lindahl, and Mitrut 2014). 2 The campaign consisted of two distinct components: (i) increasing the threat of punishment for teachers and students caught taking/ giving bribes and (ii) closed-circuit TV (CCTV) monitoring of the exam centers in an effort to eradicate mass cheating and bribes during the examination.…”

“…In addition, this sample also excludes 2 percent of the student population, for which we do not have data on our set of controls. 20 The increase in 2010 is discussed in Borcan, Lindahl, and Mitrut (2014) to be a direct consequence of the 2010 public sector austerity measures and the sudden increase in corruption related to the Baccalaureate. Table 2.…”

“…increase in corruption until 2010 (see also Figure 1). The main explanation behind this fall, as also supported by the 2010 official report from the Ministry of Education and Borcan, Lindahl, and Mitrut (2014), lies in a few but important changes in the exam structure: (i) The oral Romanian exam, compulsory for all students, was rendered irrelevant to the calculation of the overall Baccalaureate grade (and passing). Before 2010, 99 percent of the students passed this exam (a minimum grade of 5), with an abnormally high 50 percent share of the students receiving scores between 9 and 10 (out of 10).…”