Measuring Government Favouritism Objectively: The Case of Romanian Public Construction Sector

Abstract

Government favouritism in the allocation of public funds raises costs for any society in which corruption prevails. Particularistic transactions can be identified in three different situations: uncompetitive awards of public contracts when there is only one “competitive” tender, when public money is spent on contracts supplied by politically connected firms, and a situation of capture in which one private contractor obtains a disproportionate share of contracts issued by some public agency. This present research has tested for the relevance of those three types of particularistic transactions that signal government favouritism as they apply to the Romanian construction sector for the period from 2007-2013, and to do so has made use of original public procurement databases. Furthermore, it will be proposed here that the “kickback”—a percentage of particularistic awarded values—can be used as a measurement of corruption. Even conservatively estimated, kickbacks account for much of the cost borne by any society that fails to eradicate corruption. For our purposes here, amounts of kickbacks at county level have been controlled against criminal convictions for corruption at county level. As a result, data analysis provides strong evidence that kickbacks based on particularistic allocation of public funds are indeed relevant in the measurement of corruption, and the steps used to evaluate kickbacks can be used just as well for other countries.