The Anticorruption Report Vol. 4: Beyond the Panama Papers

The final title in the series The Anticorruption Report covers the most important findings of the five-year-long EU-sponsored ANTICORRP project on corruption and organized crime. How prone to corruption are EU funds? Who wins and who loses the anticorruption fight? And can we have better measurements than people’s perceptions to indicate if corruption changes? This issue introduces a new index of public integrity and a variety of other tools created in the project.

The Anticorruption Report Vol. 4: Beyond the Panama Papers looks at the performance of EU Good Governance Promotion in different countries in the European neighbourhood. Case studies focussing on Spain, Slovakia and Romania are considering the impact of EU structural funds and good governance promotion within the Union. Further chapters looking at Turkey, Egypt, Tunisia and Tanzania are analysing EU democracy and good governance support in third countries. The report, edited by Alina Mungiu-Pippidi and Jana Warkotsch offers a comprehensive and overarching look at the successes and pitfalls of the EU’s efforts to democracy promotion and introduces new ways to assess the state of good governance in different countries around the world.

Questions and Answers on Romania’s Anti-Corruption Implosion – Updated

In this brief report, Alina Mungiu-Pippidi answers key questions on the recent events in Romania regarding the passing of Ordinance 13/2017. This report covers questions on the ordinance itself, the protests which were triggered by it and the fight against corruption in Romania. The report was updated on 13 February 2017.

EU Aid and the Quality of Governance

Using a panel dataset on 103 developing countries, this paper empirically analyzes the impact of the European aid flows on quality of governance in aid recipient countries. The analysis employs aggregated Official Development Data as well as disaggregated project level data. The results show that while bilateral aid from the largest European donors does not show any impact, multilateral financial assistance from the EU Institutions leads to an improvement in governance indicators. These findings thus suggest that European development assistance can help to promote good governance if aid is allocated at the EU supranational level rather than at the national level of the member states.

Natural Resource Revenues, Corruption and Expropriation

This paper develops a formal model that looks at the mutually endogenous determination of foreign direct investments in natural resource-rich countries, the decision of host governments to expropriate these investments, and the level of corruption. Higher resource production makes expropriation more attractive from the perspective of national governments. A low expropriation risk is in turn an important determinant of international investments and is therefore associated with high levels of production. Moreover, resource production leads to high levels of corruption. Theoretical results are confirmed by estimations of a simultaneous equation model for 50 resource-rich countries in which the authors endogenize expropriation risk, corruption, and resource production.

The State of State Capacity: a review of concepts, evidence and measures

What is state capacity and how does it affect development? The concept of state capacity acquired centrality during the late seventies and eighties, sponsored by a rather compact set of scholarly works. It later permeated through several disciplines and has now earned a place within the many governance dimensions affecting economic performance. The present article aims to provide a historical account of the evolution and usage of the state capacity concept, along with its various operationalizations. It examines in particular: a) the growing distance in the usage of the concept by different disciplinary and thematic fields; b) the process of `branching out’ of the concept from restricted to more multidimensional definitions; c) the problems with construct validity and concept stretching, and d) the generalized lack of clarity that exists regarding the institutional sources of state capacity.

Mode of International Investment and Endogenous Risk of Expropriation

This paper analyzes the relationship between the mode of international investment and institutional quality. Foreign investors from a capital-rich North can either purchase productive assets in a capital-poor South and transfer their capital within integrated multinational firms or they can form joint ventures with local asset owners. The South is ruled by an autocratic elite that may use its political power to expropriate productive assets. The expropriation risk lowers the incentive to provide specific capital in an integrated firm and distorts the decision between joint ventures and integrated production. We determine the equilibrium risk of expropriation in this framework and the resulting pattern of international production. We also analyze as to how globalization, which is reflected in a decline in investment costs, influences institutional quality.

Financial Liberalization and Institutional Development

This study empirically analyzes the effects of de jure financial openness on institutional quality as captured by indicators on investment risk, corruption level, impartiality of judiciary system, and the effectiveness of bureaucracy. We show that a higher degree of financial openness improves institutional quality mainly by reducing investment risks. We also study the effect of a single liberalization reform. Again, we find evidence for the beneficial impact of financial liberalization with the exception of corruption. We additionally show that the benign consequences of financial opening for the institutional development are even larger if financial liberalization is supported by simultaneous political liberalization, while financial deregulation in former socialist countries tends to worsen institutional quality.

The Anticorruption Report. Volume 1: Controlling Corruption in Europe

The first volume of the Anticorruption Report series provides a comprehensive analysis of causes and consequences of corruption in three European regions, presenting corruption risks for several European countries and concrete policy recommendations on how to effectively address those risks.

Print and e-book version of the report can be purchased here.

Global comparative trend analysis report

Can governance be changed by human agency? The answer to this central policy question has been taken for granted in the last twenty years as good governance promotion began to feature as a top priority of every international donor organization. Despite this fact, the answer is not as simple. In this introductory study the answer is divided in two parts. The first question pertains to whether governance—as defined in the framework of this project as a set of institutions determining who gets what in a given society—evolves at all, other than incrementally, in the absence of radical intervening factors (e.g., war, military occupation or natural disaster). The second part questions, where such natural evolution can be observed with some certainty, is it intentional human agency which brings the change about. The objective of this trend analysis report is to answer the first part of the question and identify cases of evolution.

Financial Integration in Autocracies: Greasing the Wheel or More to Steal

This paper analyzes the influence of financial integration on institutional quality. We construct a dynamic political-economic model of an autocracy in which a ruling elite uses its political power to expropriate the general population. Although financial integration reduces capital costs for entrepreneurs and thereby raises gross incomes in the private sector, the elite may counteract this effect by increasing the rate of expropriation. Since de facto political power is linked to economic resources, financial integration also has long run consequences for the distribution of power and for the rise of an entrepreneurial class.

Beyond Perception: Has Romania’s Governance Improved since 2004?

Romania and Bulgaria encounter today problems in joining the visa-free Schengen area. The main one in the public eye is corruption. Both countries pledged to improve their rule of law when signing their accession treaties in 2005, yet little progress is perceived by observers or captured with governance measurements relying on perception, such as CPI and World Bank Governance indicators. This paper explores real policy, with fact-based indicators, to trace progress in the area – or lack of it – since 2004 to the present.

The Experience of Civil Society as an Anti-Corruption Actor in East Central Europe

Why, despite their most remarkable progress on democracy, have most East Central European states retained modest levels of governance? Is civil society still able to play any significant role in improving governance, even after its institutionalization at low levels of participation, after its initial high mobilization in the early years of democratization? Does the impact, or lack of impact, of civil society do anything to explain the quality of governance? This paper addresses all these issues and more.