Breaking the Cycle? How (Not) to Use Political Finance Regulations to Counter Public Procurement Corruption

GTI-WP/2016:01, Budapest: Government Transparency Institute

35 Pages Posted: 16 Jun 2016 Last revised: 29 Dec 2016

See all articles by Mihaly Fazekas

Mihaly Fazekas

Central European University (CEU); Government Transparency Institute

Luciana Cingolani

UNU-MERIT

Date Written: February 1, 2016

Abstract

There are widespread perceptions and countless documented cases of tight-knit networks of politicians and businessmen colluding for allocating public procurement contracts in return for political party donations. In the absence of systematic evidence, neither the magnitude of the problem nor the effectiveness of policies curbing such corruption is well-understood. In order to advance our understanding of these phenomena, this paper tests whether political financing regulations can contribute to controlling corruption in public procurement. We utilize aggregated official micro-level data on almost 3 million contracts awarded across 29 European countries in 2009-2014 to measure the risk of high-level institutionalised corruption using novel proxy indicators. Legislation regulating political finances are directly measured by coding national laws in 2009-2014. In cross-country panel regression and difference-in-difference models, we find that introducing additional political financing restrictions does not have a measurable negative impact on public procurement corruption risks. In fact, the observed effect is positive in most models. The observed relationship remains the same for most constitutive components of political financing regulations. Several challenges remain for a conclusive judgement of political party financing regulations’ effectiveness to curb corruption such as measuring implementation rather than legislation, allowing for longer lead-time for regulatory impact, or considering institutional inter-dependencies.

Keywords: corruption, political finance, Europe, procurement

Suggested Citation

Fazekas, Mihaly and Cingolani, Luciana, Breaking the Cycle? How (Not) to Use Political Finance Regulations to Counter Public Procurement Corruption (February 1, 2016). GTI-WP/2016:01, Budapest: Government Transparency Institute, Available at SSRN: https://ssrn.com/abstract=2795821 or http://dx.doi.org/10.2139/ssrn.2795821

Mihaly Fazekas (Contact Author)

Central European University (CEU) ( email )

Quellenstrasse 51
Vienna, 1140
Austria

Government Transparency Institute ( email )

Kecskemét
Hungary

Luciana Cingolani

UNU-MERIT ( email )

Keizer Karelplein 19
Maastricht, 6211TC
Netherlands

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