Are EU Funds a Corruption Risk? The Impact of EU Funds on Grand Corruption in Central and Eastern Europe

In Alina Mungiu-Pippidi (ed.), The Anticorruption Frontline. The ANTICORRP Project, vol. 2., Barbara Budrich Publishers, Berlin, pp.68-89

23 Pages Posted: 6 Dec 2013 Last revised: 6 Nov 2014

See all articles by Mihaly Fazekas

Mihaly Fazekas

University of Cambridge - Faculty of Human, Social, and Political Science

Jana Chvalkovska

Charles University in Prague

Jiri Skuhrovec

Charles University in Prague

István János Tóth

Hungarian Academy of Sciences (HAS)

Lawrence P. King

Yale University - Department of Sociology

Date Written: December 4, 2013

Abstract

The paper explores the impact of EU funds on institutionalised grand corruption in public procurement during 2009-2012 in three countries: Czech Republic, Hungary, and Slovakia. We analyse a unique pooled database containing contract-level public procurement information for all three countries. We develop a composite corruption risks indicator based on the incidence and logical structure of ‘red flags’ in individual public procurement transactions. Preliminary findings indicate that EU funds impact institutionalised grand corruption, first, by providing additional public resources available for corrupt rent extraction; second, by changing the motivations for and controls of corruption for the additional resources. Preliminary calculations indicate that the first effect increases the value of particularistic resource allocation by up to 1.23% 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. The negative effect of EU Funds on controlling corruption call for carefully balancing the economic benefits with substantial governance costs.

Keywords: public procurement, grand corruption, corruption indicators, Central and Eastern Europe, EU funds, aid dependency

JEL Classification: D72, D73, H57

Suggested Citation

Fazekas, Mihaly and Chvalkovska, Jana and Skuhrovec, Jiri and Tóth, István János and King, Lawrence P., Are EU Funds a Corruption Risk? The Impact of EU Funds on Grand Corruption in Central and Eastern Europe (December 4, 2013). In Alina Mungiu-Pippidi (ed.), The Anticorruption Frontline. The ANTICORRP Project, vol. 2., Barbara Budrich Publishers, Berlin, pp.68-89. Available at SSRN: https://ssrn.com/abstract=2363545 or http://dx.doi.org/10.2139/ssrn.2363545

Mihaly Fazekas (Contact Author)

University of Cambridge - Faculty of Human, Social, and Political Science ( email )

Cambridge, CB3 9DD
United Kingdom

Jana Chvalkovska

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

Jiri Skuhrovec

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

István János Tóth

Hungarian Academy of Sciences (HAS) ( email )

Budapest
Hungary

Lawrence P. King

Yale University - Department of Sociology ( email )

493 College St
New Haven, CT 06520
United States

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