Corruption, Institutions and Convergence

Abstract

This chapter focuses on the measurement of institutional convergence in the new EU member states and four Southern European EU member countries. Previous studies have used perception data or expert surveys at the country level to quantify institutional convergence. We present a new method which is based on hard micro-level data. Our approach focuses on control of corruption risks in public procurement in European countries. We use a contract-level dataset from 2006 to 2018 with more than 3.6 million observations downloaded from the European Union TED database. We consider control of corruption risks as a proxy for or aspect of institutional quality, and the countries with high institutional quality (high ability to control corruption) as a benchmark to measure differences in test country performance. Our results partially support earlier research on the poor performance of Southern European EU countries and show the considerable differences in institutional convergence between the new EU member states. Slovakia, Estonia and Lithuania have achieved strong institutional convergence and by now have reached high institutional quality in control of corruption risks. Meanwhile, Poland has attained some convergence, but its institutional quality still remains relatively weak. Latvia has shown a certain stability in this regard. Other countries like Hungary, the Czech Republic and Romania have had a low level of convergence starting with weak initial institutional quality. Thus, they now have institutions with a weak or moderate ability to control corruption risks. Slovenia and Bulgaria have displayed the weakest performance, with divergence from the benchmark countries. These findings show that institutional reforms at the national level matter and that EU policies promoting these measures are necessary but not sufficient conditions for successful institutional convergence.