"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

Cronyism in Hungary. Empirical analysis of public tenders 2010-2016

17 September 2018

Istvan Janos Toth and Miklos Hajdu: Cronyism in Hungary. An empirical analysis of public tenders 2010-2016

In this paper, we use the public procurement database which contains data from more than 230,000 public tenders from 1997 to 2017. The analysis is based on data from 126,330 public procurement contracts from 2010 to 2016. The research was supported by the Hungarian National Scientific Fund (OTKA, K116860).   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 corruption risks, the intensity of competition and the strength of price competition among tenders won by crony companies and that among tenders won by other, ordinary Hungarian firms. We use indicators as a dummy variable the single bidder to measure corruption risks, index of intensity of competition and the relative price drop, RPRD to measure the intensity of competition. Our results point out the existence of political favoritism in Hungarian public procurement during the period under examination. The corruption risk is significantly higher and the intensity of competition is significantly lower in tenders won by MGTS firms than other tenders won by ordinary Hungarian companies and 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.

 

The paper (pdf)
The figures (xlsx)
Presentation at the conference “Kornai Janos 90 years” (pdf)