Corruption manual for beginners: "Corruption techniques" in public procurement with examples from Hungary

This paper develops 30 novel quantitative indicators of grand corruption that operationalize 20 distinct techniques of corruption in the context of public procurement. Each indicator rests on a thorough qualitative understanding of rent extraction from public contracts by corrupt networks as evidenced by academic literature, interviews and media content analysis. Feasibility and usefulness of the proposed indicators are demonstrated using micro-level public procurement data from Hungary in 2009-2012. While the prime value of this broad set of indicators is the possibility of combining them into a robust composite indicator of high-level corruption, the high degree of detail also reveals that many regulatory interventions have succeeded in changing the form of corruption, but not its overall incidence

Corruption and the Network Structure of Public Contracting Markets across Government Change

Corruption is thought to affect developed economies to a greater degree than developing countries. However, given our limited capacity to detect corruption, it may simply be harder to detect it in countries with stronger institutions. This article sets out to address this measurement challenge and to offer a tailored approach to one particular type of corruption: high-level corruption in government contracting. We describe a recently developed method to score procurement contracts for corruption risk. Then, using micro-level data from Hungary and the Czech Republic we analyze how corruption can distort public procurement markets, mapped as networks of buyers and suppliers. Proxying for corruption using a composite index of red flags derived from contract awards, we find that public sector buyers with high corruption risk have sparser network neighborhoods, meaning that they contract with fewer suppliers than expected. We interpret our results as evidence that corruption in procurement markets is fundamentally about the exclusion of non-favored firms. Political change has a significant effect on corrupt relationships: High corruption risk buyers with sparse neighborhoods rewire their contracting relationships roughly 20–40% more extensively than other buyers across years with government turnover. The article demonstrates how the political organization of corruption distorts market competition in OECD countries

Grand corruption and government change: an analysis of partisan favoritism in public procurement

Incoming governments sometimes abuse their power to manipulate the allocation of government contracts so as to buy loyalty from cronies. While scandals suggest such practices are relatively widespread, the extent of such partisan favoritism is difficult to measure and the conditions under which it flourishes under-theorized. Drawing on theory regarding the role of institutions as constraints on corruption, we identify three spheres of political influence over government contracting and show how elites can manipulate two of those spheres to increase their opportunities to influence the procurement process and minimize external accountability, facilitating the corrupt allocation of contracts to partisan allies. Using an innovative big data methodology, we then identify the effects of a change in government on procurement markets in two countries, Hungary and the United Kingdom, which differ in terms of political influence over these institutions. We find that politically-favored companies secure 50–60% of the central government contracting market in Hungary but only 10% in the UK

Prometheus unbound: quality of government and institutionalised grand corruption in public procurement

This PhD thesis looks at one of the most crucial determinants of state formation, quality of institutions, and social equality: institutionalised grand corruption. Institutionalised grand corruption denotes the particularistic allocation of public resources, that is violating prior explicit rules in order to benefit a closed network while denying access to all others. Emphasizing access to power and public resources deviates from traditional definitions of corruption resting on individual wrongdoing and abuse of power. The thesis makes use of large amounts of administrative data describing public procurement tenders on transaction level and links it to data on company ownership, financial accounts, and political office of company owners. By using data mining techniques it breaks away from standard, and arguably deficient, measures of quality of institutions and corruption. It proposes a complex ‘blueprint’ for measuring institutionalized grand corruption in the allocation of public resources and applies its key elements to three Central and Eastern European countries: Czech Republic, Hungary, and Slovakia. It is emphasized that these cases are only ‘pilot’ measurements, the blueprint is applicable to practically every high and middle income country, data is typically going back in time for 6-8 years. Using such a novel indicator set allows for an unprecedented detail of analysis. Results highlight the role played by European Union Structural and Cohesion Funds in increasing the prevalence of institutionalised grand corruption. This is due to at least two factors, first, they provide additional public resources available for corrupt rent extraction; second, they change the motivations for and controls of corruption. In Czech Republic, Hungary, and Slovakia, the first effect increases the value of particularistic resource allocation by up to 1.21% of GDP, while the second effect decreases it by up to 0.03% of GDP. The latter effect is entirely driven by Slovakia; in Czech Republic and Hungary even this effect increases particularism.European Union and the Hungarian Government: TAMOP 4.2.2.B and ANTICORRP (Grant agreement no: 290529

Cross-national diffusion in Europe

The diffusion of the use of various forms of impact assessments (IAs) in different political settings and legal traditions illustrates its great malleability and the operation of various factors. This diversity is not only reflected in the adoption of different models of IA across the various jurisdictions examined, but also in the way this practice is effectively implemented. Factors explaining the various types of IA implemented in various European jurisdictions include the patterns of diffusion from one country to another, the interaction of politics with expert knowledge and the prevailing ‘evidence eco-system’ in each jurisdiction. The authors illustrate this phenomenon by exploring diffusion patterns not only in terms of the adoption of IA, but also in terms of the adoption of IA types. They do so by introducing a taxonomy developed with the purpose of describing the interaction of politics and expertise in each jurisdiction. The chapter is completed by empirically connecting the diffusion process with the type of IA prevalent in a jurisdiction