Abstract: By making use of the corporate survey data provided by World Bank, this paper examines the relationship between corporate corruption and the internal pay gap between employees at different levels. The results show that corporate corruption has expanded the salary gaps between the CEO and the middle managers, between the middle managers and the ordinary employees, and between the CEO and the ordinary employees, however, this effect of corporate corruption exists only in domestic enterprises. The above conclusion provides microcosmic evidences for the corruptive income distribution effect in the macro economy, which can also offer new explanations for the widening pay gap within the firm.

Key words: corporate corruption; pay gap; distribution effect; domestic enterprises