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Lights on the Shadows of Public Procurement

Bauhr, Monika; Czibik, Agnes; Fazekas, Mihaly; de Fine Licht, Jenny

Transparency is widely promoted as an essential condition for good governance, and as an effective tool against public sector corruption more specifically. Although the empirical evidence on the impact of transparency on corruption is growing, empirical evidence remains mixed. Recent critique holds that a main reason for the lack of robust empirical evidence is that both conceptualization and available measures of government transparency are broad and sometimes imprecise. This paper seeks to develop a more precise conceptualization and measure of transparency in the field of public procurement that is actionable for the stakeholders of government decisions. We use data of more than 4 million public procurement contracts between 2006-2015 to investigate the impact of transparency on high-level corruption risks in public procurement across Europe. We also link data from a unique large-scale regional survey to the public procurement dataset to study interactions between transparency and the wider public demand for accountability. We find a strong negative impact of overall tender transparency on corruption risks. The results also show that ex-ante transparency, i.e. transparency before the contract is awarded, has a stronger effect on corruption risks than ex-post transparency, i.e. the availability of information after the contract has been awarded to a bidder. This suggest that providing information to the parties involved in the bidding process rather than to outside observers, is the main condition for wider public accountability to emerge. However, the effectiveness of this type of transparency is strengthened in contexts where there is also a wider societal demand for reduced corruption. In sum, our results suggest that transparency can reduce corruption risks if the information is both relevant to inside observers and actionable. 

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