Morality, Altruism, and Occupation Choice: Theory and Evidence

We consider occupation/effort choices between a private sector that provides incentive-based pay and a public sector that offers opportunities for corruption, but fixed wages. We estimate subject-specific parameters of dishonesty-aversion and altruism from the occupation/effort choice game and estimate separate proxies for these parameters from the dictator/die-rolling games; the estimated parameters are portable across the two games. The majority of subjects choose the corrupt public sector job, and more dishonest subjects choose this job. Those choosing the private sector use a simple heuristic of maximizing legal-monetary payoffs, and are more honest. Effort is highest in the private sector. Corruption increases the size of the public sector, but consumer welfare is unchanged relative to a honest public sector job.