The Political Economy of Grand Corruption in Public Procurement in the Construction Sector of Hungary

Abstract

Private sector companies develop a diverse set of political connections in high and low corruption countries alike. Using political connections to gain advantage when competing for government contracts is a major form of corruption from Denmark to Italy. Recognizing the difficulty of controlling this type of ‘grand’ corruption this chapter sets out to explore the effect of direct political control of companies bidding in public procurement under diverse institutional controls. It does so in a medium income country characterized by systemic corruption risks: Hungary. It looks at how political connections work across public organizations with different levels of integrity and in markets with different degrees of corruption risks. Findings indicate that political connections increase connected company success probability only in high corruption risk tenders and markets while they remain weaker or ineffective in other contexts. These results point out the need to strengthen the governance of government contracting as a crucial addition to widely used tools of controlling revolving door and political party finances.