Impact of technology on corruption : a study of impact of e-procurement on prices of various government purchases

Abstract

Corruption is a challenge that can restrain a country’s development, and there have been many initiatives to address this severe global phenomenon. Given the increasing role of technology in an interconnected world, many leading experts suggest that this same technology can be a powerful tool to improve government transparency and accountability, which will, in turn, hamper corruption. This thesis aims to study the relationship between the use of technology and its impact on corruption. Being inspired by other studies that assess how e-governments helped to tackle corruption, we focused on how e-procurement reforms in the public sector affected the level of corruption in Ukraine. Since corruption itself is a complex phenomenon that is hard to measure, we conducted our assessment through measuring the impact of e-procurement on prices and competition. Additionally, we will elaborate on how this impact varies among different government purchases depending on the complexity of the purchase. We find that ProZorro (an e-procurement solution in Ukraine) had a positive impact on reducing the prices for government purchases overall. Just as we expected, there was a stronger impact on prices and competition among goods, compared to services and works since ProZorro implementation. However, when we analyzed the impact on specific purchases, we did not find consistent results that the impact is stronger for simple purchases (natural gas, among others) compared to complex purchases (road repairs, engineering consulting). Furthermore, contrary to our expectation we found a decreasing reduction in price over time when analyzing monthly data. Our findings suggest that although ProZorro did have a significant impact on reducing the prices of purchases, however, those numbers will not be taken at face value because of the way of calculating the estimated market data. Despite that weakness in the empirical validity of our price reduction indicator, we have seen enough signs of indirect positive effects of ProZorro, which are hard to quantify. Among those benefits are increased use of ProZorro in the media to expose corruption, and push for other reforms inspired by ProZorro’s success.