"When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be."
Lord Kelvin

How does the Kleptocratic State Work in Hungary?

István János Tóth – Miklós Hajdu: How does the Kleptocratic State Work in Hungary? A research note based on Hungarian public procurement data. CRCB, Budapest, January 26 2018.

January 26th  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 1997 to 2017. The analysis is based on data from 126,330 public procurement contracts from 2010 to 2016. The focus of the analysis is 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 with the abbreviation MGTS). During the analysis, we make a statistical comparison of the strength of price competition among tenders won by crony companies and that among tenders won by other, ordinary Hungarian firms. We use an indicator (the relative price drop, RPRD) to measure price competition, RPRD being the difference between the estimated value and the contract value divided by the contract value and multiplied by 100. RPRD thus characterizes the price competition for 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 shows a lower intensity of competition and higher level of corruption risks. Our results point out the existence of political favouritism in Hungarian public procurement during the period under examination. The median RPRD values of tenders won by MGST firms are very close to the median value of tenders with the highest corruption risks and lowest intensity of competition.

 

Short Paper in English (pdf )