proposing that corruption may be less severe in highly centralized and decentralized states, than in states with an intermediate level of institutional centralization.

Diverging from neo-classical economics, Deci (1975), Frey (1997), Lindenberg (2001), Tendler (1997), and others identify a lack of intrinsic, internal, or personal motivation as an important determinant of professional behaviour. They see such motivations, especially in the form of professional ethics or norms, as providing a basis for self-enforcement mechanisms.<sup>2</sup> This may work better in some types of organizations than in others, and may explain why NGOs or religious organizations may be more able to overcome agency problems (Glaeser and Shleifer 2001; Pauly 1987). Looking at worker motivation in general, Kreps (1997) and Franco, Bennet, and Kanfer (2002) suggest that a reliance on extrinsic incentives may undermine internal sources of motivation, while Segall argues that “market relationships present health care providers with perverse incentives and can do violence to the professional ethos of caring.” (Segall 2000, p. 11) While this theoretical literature has generated many insights into the possible causes of corruption, empirical verification has proven difficult. Chiappori and Salanié (2002), for example, highlight the general mismatch between theoretical predictions and what is observed in terms of real contract forms. The former tend to be much more complex than the latter. Factors such as merit pay, group incentives, career concerns, and the possible role of professional cultures, norms and ethics only exacerbate this mismatch (Dixit 1997, 2001; Wilson 1989).

With few exceptions (e.g. Ablo and Reinikka 1998; Fisman and Gatti 2000; Svensson 2003), empirical analysis of corruption has often been based on cross-country perception data.<sup>3</sup> This analysis has focused an a wide range of factors, including legal systems, socio-economic development, political rights and democracy, ethnic composition, dimensions and degrees of decentralization, political instability, openness to trade, and public sector salaries and recruitment policies (for a review, see Andvig and Fjelstad (2001)). Of particular interest to us here is the work of Van Rijkeghem and Weder (2001) who find that, although higher public servant salaries (relative to manufacturing wages) are associated with less corruption, those salaries would have to 2 The term intrinsic motivation is not always clearly defined. Kreps (1997) argues that in many cases what is referred to as intrinsic incentives may in fact be workers’ response to fuzzy extrinsic motivators such as fear of discharge or career concerns, but he also acknowledges that “true” intrinsic motivation may be an important factor in many contexts. A helpful (and pragmatic) definition comes from self-perception theory in psychological literature, where intrinsic motivation is the motivation that drives an individual to conduct a task whatever the external incentives. Extrinsic motivation, on the other hand, is the motivation that drives a person to conduct a task, whether she likes it or not, because of the external incentives.

> 3 E.g. Transparency International’s Corruption Perception Index.

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