Corruption as practice . Fact based indicators for policy diagnosis and evaluation .

1. This project is co-funded by the Seventh Framework Programme for Researchand Technological Development of the European Union Corruption as practice.Fact based indicators for policy diagnosis and evaluation. Prof. Dr. Alina Mungiu-Pippidi (Hertie School of Governance) againstcorruption.eu • anticorrp.eu • digiwhist.eu Contacts: pippidi@hertie-school.org

2. The world is based on particularism (corruption as social practice), not ethical universalism Enforcing ethical universalism takes effort, expense, values Particularism; Institutional corruption Universalism; Public integrity Government is impersonal and impartial and treats everyone, ‘not taking anything into consideration about the citizen/case that is not beforehand stipulated in the policy or the law’ Swedish code of conduct World Bank Control of Corruption with Denmark 10, recoded 1-10

3. What you define is what you measure • Corruption as waste/ cost ineffectiveness- PET World Bank, Picci and Golden Italian cost of infrastructure • Corruption as material inducement- Picci and Escressa PACI • Corruption as deviation from impartiality/ethical universalism (government favoritism, state capture) – Mungiu-Pippidi, Fazekas • Corruption as deviation from procedure (CRI, Fazekas and Toth) • Corruption as market distortion (World Bank, ERCAS) • Corruption as prevalence of conflict of interest (TiEU) • Corruption as flawed political process, lack of access (US) • Corruption as integrity framework (Global Integrity, IPI)

4. 3. Diagnosis Particularism Allocations to sub-national govt

5. Indicator: Government Favoritism elections Source: MaKAB, Note: market share=total value of contracts won / total value of contracts won in EU funded construction in time t

6. Government favoritism- Bulgaria. Outcome based state capture

7. OUTCOME BASED INDICATORS – State capture Public works contracting before and after EU accession (up to 2009) Gross profit rate Romanian ‘networked’ versus foreign companies Highest infrastructure investment in EU (6%) –more than education, health, etc.

8. Procedural based approach– procurement risk measures Red flags • Red flags are: • warning signals, hints, indicators of possible fraud! • The existence of a red flag does not mean that fraud exists but that a certain area of activity needs extra attention to exclude or confirm potential fraud.

9. Procedure based Single bidding in EU- 29Tender Electronic Daily data

10. Singlebiddercontracts corruptionrisk

11. Clientelismmeasurement / outcome and procedurecombined Evolution of the government reserve fund for natural disasters 2002-2010 excluding disaster related expenses

12. The means- example from Croatia Politicization

13. Indicator: State capture

14. Indirect indicators- integrity frameworks

15. Public integrity as interaction Constraints Resources PUBLIC INTEGRITY INDEX

16. IPI Components Administrative Burden - extent of domestic bureaucratic regulations; room for discretion and red tape (time and procedures to start business and pay taxes, DB 2016) Trade Openness - the extent of regulations concerning a country’s external economic activities; level of administrative trade barriers (number of procedures and time for exporting and importing; DB 2015) Budget Transparency - extent and the quality of public accessibility of the executive’s budget proposal; control mechanism for discretionary public spending (Open Budget Survey 2015 and own data)

17. IPI Components cont. Judicial Independence - Impartiality and independence of the overall judiciary system (Global Competitiveness Database 2015-16) E-Citizenship – ability of citizens to use online tools and social media and thus exercise social accountability(broadband subscriptions, internet users and share of Facebook users relative to the population; International Telecommunication Union and Internet World Stats 2015) Freedom of the Press - legal, political and economic environment of in which the local media operates (Freedom House 2015)

18. Relevance of the Components OLS regressions. The dependent variable is the WGI Control of Corruption 2014. t statistics in parentheses * p < 0.05; ** p < 0.01; *** p < 0.001. Robust std. err. are used.

19. Interactions of Components OLS regressions. The dependent variable is the WGI Control of Corruption 2014. p values in parentheses: *p < 0.1; **p < 0.05; ***p < 0.01. Robust std. err. are used.

20. Building IPI • Standardization of raw data (equal means and standard deviations) for each component • For components consisting of more than one variable (e.g. administrative burden) the same procedure is applied at the disaggregated level • Using principal component analysis: • IPI – normalized values (1-10) of the first principal component • Explains around 56 % of the data variation • The only one with an eigenvalue of larger than one • Alternatively, simple aggregation with equal weights • Correlates with the IPI at the value of 99% • Used for visualization at http://integrity-index.org(available soon)

21. IPI strongly correlates with the common corruption indicators….

22. But IPI shows where the values come from….www.integrity-index.org

23. Public integrityacross Europe:Howdiditchangebetween 2012-2014

24. Some lessons learned from our success cases – Estonia, Georgia, Uruguay... • Public integrity frequently a by-product of other phenomena or policies • Simplicity and low transaction costs essential (why was Florence Nightingale not corrupt?) • Realism-address only what has high social cost • Demand and supply cannot be separated • State-society design - Monterrey example