A quantitative analysis of the costs of corruption in the EU
Corruption is a worldwide phenomenon, resulting in substantial losses for society. RAND Europe researchers quantified the economic and societal losses due to corruption in the European Union and identified potential scenarios for reducing corruption and addressing its related challenges.
What is the issue?
Corruption is a worldwide phenomenon and results in substantial losses for society, stemming from market distortions, improper management of public money and lapses in good governance, thereby affecting economic performance and quality of life. In addition, it can undermine political and social stability, and further exacerbate inequality and poverty. It poses a significant challenge to social justice and the rule of law, which in turn may undermine a population's trust in democracy and democratic institutions and processes. However, the hidden and informal nature of corruption makes it difficult to observe or measure.
Despite the European Union (EU) taking several actions to tackle corruption over the past few years, there is a need for further EU action to combat corruption and its negative impacts on the societies and economies of the EU.
How did we help?
The aim of this report is to quantify the economic and societal losses due to corruption in the European Union, and to identify potential for action at EU level that might add value and address the challenges identified.
The analysis provides a quantitative estimation of the costs of corruption in the EU. In order to do so, two different quantitative approaches are developed. First, recent data is used to update existing estimates on the cost of corruption risk in EU public procurement, with a specific focus on estimating the costs of corruption risk in the procurement of contracts where EU funds have been used. Second, innovative cost estimates for the individual wellbeing costs associated with corruption among EU citizens are provided using an established methodological framework that has not yet been applied in the area of corruption. Using the wellbeing valuation approach, the association between exposure to corruption and subjective wellbeing is empirically assessed across member states and valued in monetary terms.
The analysis also includes an assessment of the potential cost savings for two scenarios in which policy options lead to a reduction in corruption in public procurement and a reduction in experienced corruption among EU citizens.
What did we find?
The analysis conducted for this report estimated the cumulative cost of corruption in public procurement in the EU27 between 2016 and 2021 at €29.6 billion. The total cost of corruption risk in public procurement contracts involving EU funds is estimated to reach €4.3billion in the same period.
The analysis also shows that EU citizens who have experienced corruption are more likely to have lower life satisfaction, which can be attributed, at least in part, to a lower trust in both people and institutions.
What can be done?
The analysis suggests that EU action to support member states' fight to reduce corruption could generate considerable financial savings and improvements to societal wellbeing.