This paper aims to understand how corruption responds to financial incentives. In particular, we attempt to identify the effect of a wage loss on corruption in the education sector. Exploiting an unexpected wage cut that affected all Romanian public sector employees, including the public education staff, we examine its effect on students’ exam scores. Using a difference-in-difference strategy, we find that the wage loss led the public schools to have better exam outcomes than the private schools (which were unaffected by the wage cut). We attribute this to an increased involvement in bribes and corrupt activities by public school staff.