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Anatomy of grand corruption: A composite corruption risk index based on objective data

  • Mihaly Fazekas


    (University of Cambridge Faculty of Politics, Psychology, Sociology)

  • Istvan Janos Toth


    (Centre for Economic and Regional Studies Hungarian Academy of Sciences)

  • Lawrence Peter King


    (Department of Sociology University of Cambridge)

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    Although both the academic and policy communities have attached great importance to measuring corruption, most of the currently available measures are biased and too broad to test theory or guide policy. This article proposes a new composite indicator of grand corruption based on a wide range of elementary indicators. These indicators are derived from a rich qualitative evidence on public procurement corruption and a statistical analysis of a public procurement data in Hungary. The composite indicator is constructed by linking public procurement process 'red flags' to restrictions of market access. This method utilizes administrative data that is available in practically every developed country and avoids the pitfalls both of perception based indicators and previous 'objective' measures of corruption. It creates an estimation of institutionalised grand corruption that is consistent over time and across countries. The composite indicator is validated using company profitability and political connections data.

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    Paper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 1403.

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    Length: 51 pages
    Date of creation: Jan 2014
    Date of revision:
    Handle: RePEc:has:discpr:1403
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    1. Benjamin A. Olken & Rohini Pande, 2012. "Corruption in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 479-509, 07.
    2. Olken, Benjamin A., 2006. "Corruption and the costs of redistribution: Micro evidence from Indonesia," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 853-870, May.
    3. Auriol, Emmanuelle & Flochel, Thomas & Straub, Stéphane, 2011. "Public Procurement and Rent-Seeking: The Case of Paraguay," IDEI Working Papers 661, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115, pages 200-249.
    5. Staffan Andersson & Paul M. Heywood, 2009. "The Politics of Perception: Use and Abuse of Transparency International's Approach to Measuring Corruption," Political Studies, Political Studies Association, vol. 57, pages 746-767, December.
    6. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2009. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," American Economic Review, American Economic Association, vol. 99(4), pages 1278-1308, September.
    7. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    8. Coviello, Decio & Gagliarducci, Stefano, 2010. "Building Political Collusion: Evidence from Procurement Auctions," IZA Discussion Papers 4939, Institute for the Study of Labor (IZA).
    9. Kaufmann, Daniel & Vicente, Pedro C., 2005. "Legal Corruption," MPRA Paper 8186, University Library of Munich, Germany.
    10. Denis Audet, 2002. "Government procurement: A synthesis report," OECD Journal on Budgeting, OECD Publishing, vol. 2(3), pages 149-194.
    11. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 269-92, April.
    12. repec:tpr:qjecon:v:119:y:2004:i:2:p:678-704 is not listed on IDEAS
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