Careers, Connections, and Corruption Risks: Investigating the Impact of Bureaucratic Meritocracy on Public Procurement Processes

Abstract

Why do officials in some countries favor entrenched contractors, while others assign public contracts more impartially? This article emphasizes the important interplay between politics and bureaucracy. It suggests that corruption risks are lower when bureaucrats' careers do not depend on political connections but on their peers. We test this hypothesis with a novel measure of career incentives in the public sector-using a survey of more than 18,000 public sector employees in 212 European regions-and a new objective corruption risk measure including over 1.4 million procurement contracts. Both show a remarkable subnational variation across Europe. The study finds that corruption risks are indeed significantly lower where bureaucrats' career incentives exclusively follow professional criteria. In substantial terms, moving EU regions so that bureaucrats' merit and effort would matter as much as in, for example, Baden-Wüttemberg (90th percentile) could lead to a 13-20 billion Euro savings per year.

From Corruption to State Capture

“…The approach follows closely the composite indicator-building methodology developed and tested by earlier scholarship making use of a wide range of public procurement "red flags" (Charron et al 2016;Fazekas, Tóth, and King 2016). The measurement approach exploits the fact that for institutionalized grand corruption to work, procurement contracts have to be awarded recurrently to companies belonging to the corrupt network.…”

Civil service management and corruption: What we know and what we don't

“…However, in his study, it is not possible to separate the effect of promotions from the associated pay rise. Charron et al () find that a proxy for corruption in public procurement in European regions is associated with a view among public servants that hard work, as opposed to luck or connections, contributes to success in the public sector. Their analysis thus provides indirect evidence that merit‐based promotion incentives can help reduce corruption.…”

“…Since corruption is a sensitive subject, this approach, of course, has its own pitfall: survey responses to corruption questions may suffer from bias. Recent studies point to two solutions: survey experimental methods, such as list experiments, randomized response techniques and conjoint experiments (e.g., Gingerich ; Oliveros and Schuster ); and the use of ‘big data’ proxy measures for corruption, such as measures of competition in public procurement (Charron et al ).…”

Red tape, bribery and government favouritism: evidence from Europe

“…The measurement instrument directly stems from the above definition of corruption in public procurement and follow work of the authors elsewhere discussed extensively both single country and cross-country analyses [30][31][32]. We understand corruption risk indicators as metrics ranging between 0 and 100 where higher values indicate higher risk of corruption or government favouritism ( Table 2).…”

“…In line with our expectations, all across the EU27 plus Norway there is a marked and significant difference in the percentage of single bidder contracts won by foreign companies registered in tax havens versus those which are not: 0.28 versus 0.26; similarly for CRI: 0.34 versus 0.31 respectively (N contract = 28,642). For further validity tests and validating applications, see [30,40,44]. Regulation in these 10 areas is measured using standardized case studies capturing typical cases arising throughout the life-cycle of companies rather than soliciting general perceptions.…”