Corruption in EU Funds? Europe-wide evidence on the corruption effect of EU funded public contracting

Mihály Fazekas, István János Tóth

It is theoretically ambiguous and empirically contested whether EU Funds contribute to lower corruption and better governance or the opposite. Many recipient countries benefit to a substantial degree with allocations amounting to 2-4% of their annual GDP. A range of positive and negative cases has been uncovered by the European Commission, national governments and the media, however, there has been no Europe-wide quantitative evaluation looking at the micro-level, arguably where corruption takes place. This chapter offers just that by utilizing a large-scale public procurement database of more than 2.8 million awarded contracts in 2009-2014 from the EU’s Tenders Electronic Daily (TED) database. It systematically matches and compares EU Funded public procurement contracts with nationally funded ones in order to get an approximation of the causal impact of EU funding on corruption. Results point out that overall EU Funds increase corruption risks across Europe by 3-20% depending on the corruption risk indicator used. Findings are robust to multiple matching algorithms. However, this effect shows a remarkable variability across countries and regions underlining the importance of recipient institutional framework for example in terms of broader corruption levels.

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