The Strength of Corruption

The Economist summarized the findings of the 2010 Corruption Perception Index. Corruption is still one of the main obstacles to prosperity and good governance. Many governments around the world are reluctant to tackle corruption because it is a rewarding political behavior abusing the quality of institutions. Nevertheless, persistent corruption causes high transaction costs of contract enforcement. Thereby it is creating wasteful allocation of resources. On the other hand, developed countries are not immune to corruption. The key to high quality institutions in developed world is to find the way how to eliminate the presence of legal corruption.

According to the Index, the perception of corruption in the world is the lowest in New Zealand, Denmark, Singapore and Sweden. Scandinavian countries still remain a benchmark for the nations around the world in adopting the best practices in fighting corruption. One of the main reasons is that these countries have adopted first-class institutions in formal and informal dimension. The highest perception of corruption was found in Somalia, Myanmar, Afghanistan and Iraq. It is time for undeveloped countries to recognize that corruption is the central drawback that keeps them poor and underprivileged; because it leads to economic stagnation, moral crises, wars and social unrest.

Source: The Economist, The usual suspect (link).

Obesity and employment

A very interesting estimate by the OECD shows that women with low level of education are far more likely than men to become obese.

WSJ posted an interesting article discussing the effect of weight on pay rates in Germany and the United States. The study found that employers treat women in a similar way than fashion industry does; by rewarding very thin women with higher pay. On the other hand, very thin men tend to get paid by $8,437 less than men with average weight. As men pack up their weight, their payroll goes up as well up to the point where they become obese. According to the study, pay-maximizing male weight is 207 pounds (93.89 kg). After that point, the loss of pay and productivity is higher for male than female. The study found that women who weigh 25 pounds (11.34 kg) less than the group norm, earned an average $15,572 more than women of normal weight. Another study found that direct and indirect cost of obesity for women is $4,879 which is about twice as much as for men ($2,646).

Overall, the obesity strongly reduces employment prospects and wage rates for both male and female. It also increases social risk such as exclusion and significantly lower mobility. Obese people find it more difficult to increase the payroll and employment status. This pattern is confirmed both at the theoretical and empirical level.

Does education increase employment?

The data supplied by the OECD indicate that going to college significantly increases the likelihood of employment. The graph shows the distribution of employment rates by educational level in 8 OECD countries. Employment rates are divided into two categories - secondary degree or less and tertiary degree. The gap in employment rate between the two categories is the widest in Slovak Republic, Italy and Germany. There is a general tendency across countries that the likelihood of employment increases with the level of education. In addition, the employment gap persists in observed countries. This empirical fact is consistent with human capital theory which predicts higher earnings and employment alongside the increasing level of education.

Source: OECD (2010)