Plata y Plomo: How Higher Wages Expose Politicians to Criminal Violence

Adequate wages are an important tool to shield public officials from special interests and corruption. But what is the equilibrium effect of higher wages in the presence of criminal pressure groups, who use both bribes and violence? By means of a regression discontinuity design, we show that an increase in the remuneration of Italian municipal cabinets triggers a sizable and significant increase in criminal attacks against their members. We argue that this is triggered by higher-paid officials' lower likelihood of catering to criminal interests. In particular, we show that better-paid politicians are significantly more likely to prevent corruption in public procurement, a key area of illicit interactions between the state and criminal organizations. Additional analyses reveal that the disciplining effect of wages is driven by a change in incumbents' behavior rather than improved selection. These findings reveal how -- in the presence of criminal groups -- higher wages may limit corruption, but also foster the use of violence as an alternative tool to influence policymaking.