January 26, 2018
In this research note, we use the public procurement database built by CRCB, which contains data from more than 200,000 public tenders from 1998 to 2017. The analysis is based on data from 126,330 public procurement contracts from 2010 to 2016. The focus of the analysis is on public tenders (without framework agreements) won by companies related to cronies and family members of Hungarian Prime Minister Viktor Orbán: Lőrincz Mészáros, István Garancsi, István Tiborcz, and Lajos Simicska (we will refer to this group as MGTS). During the analysis, we conduct a statistical comparison of the intensity of price competition between tenders won by crony companies and those won by other, ordinary Hungarian firms. We use an indicator (the relative price drop, RPRD) to measure price competition, defined as the difference between the estimated value and the contract value, divided by the contract value, multiplied by 100. RPRD thus characterizes price competition in a public tender: a higher value indicates more intense competition, a lower magnitude of overpricing, and, thereby, a lower rate of corruption rents, while a lower value indicates lower competition intensity and higher corruption risks. Our results indicate political favoritism in Hungarian public procurement during the period under examination. The median RPRD values for tenders won by MGST firms are very close to those for tenders with the highest corruption risk and the lowest competition intensity.
Paper in English (PDF)
Suggested citation:
Tóth, I. J., & Hajdu, M. (2018). How does the Kleptocratic State Work in Hungary? A research note based on Hungarian public procurement data. CRCB. https://www.crcb.eu/wp-content/uploads/2018/01/mgts_2018_paper_180126_.pdf