Roundtable: Informality and Corruption in Kosovo: New Empirical Approaches

In this roundtable hosted by the Centre for Political Courage and the University of Prishtina, researcher Luca J. Uberti presented the findings of a Regional Research Promotion Programme-funded project “Mapping Clientelism and its Causes: Rents, Rent-seeking and Democracy in Kosovo and Albania (1998-2013)”. The two-year project focused on both the determinants and the economic effects of corruption. Through a partnership with a Tirana-based research outfit (Development Solutions Associates), it also developed a comparative dimension in the study of corruption in post-conflict transition countries.

The project work developed around two key research questions: is corruption detrimental to economic growth in Albania and Kosovo and, if so, can institutional reforms help reduce corruption?

The first question was tackled by means of a two-country enterprise survey designed to investigate firm-level perceptions of corruption, clientelism and rent-seeking. Given the crucial (albeit oft-neglected) role of industry and, especially, manufacturing for development and structural change, the survey exclusively covered a sample of over 200 firms operating in several sectors of industry and mining – including (amongst others) textile and apparel, base metals, pulp and paper, food and beverages, rubber and plastic, etc.

The results unequivocally showed that corruption has a net growth-reducing effect in Albania and Kosovo: firms that report operating in a non-corrupt environment grow at an average rate that is over 8 percentage points higher than other firms, holding several other determinants of firm growth constant.

However, the study showed that the net effect of corruption is the composite of several sub-effects, some of which are non-negative. For instance, firms need to rely on informal (party-based) networks of labour management and recruitment in order to discipline labour and reap the benefits of expanding the workforce. Furthermore, operating in a more corrupt environment than the ‘average’ does not bring any further reductions in output, and corruption seems to have no effect on the rate of capital investment and employment growth.

These results offer valuable insights to better target anti-corruption efforts and achieve more ‘bang for the buck’. In this vein, the second part of the project examined the record of success of some of the anti-corruption reforms promoted by the donor community since the late 1990s.

To do this, we relied on secondary data on the time distribution of important investment licenses (e.g. mining and construction permits) and used elections as ‘indicators’ of corruption, with strong increases in licensing around elections interpreted as signs that licenses are awarded in exchange for bribes and/or votes.

We then studied the impact of relevant regulatory and ‘good governance’ reforms on the intensity of the election cycle – that is, on the magnitude of corruption. Our findings showed that, in Kosovo’s mining sector, regulatory reforms designed to reduce corruption had no significant effect on the actual incidence of corruption. Our results cast doubt on the viability of fighting corruption by tinkering with formal institutions – which has been the overwhelming focus of anti-corruption strategies to date. By contrast, our findings suggest that anti-corruption agencies should pay greater attention to the informal determinants of corrupt practices.

Luca J. Uberti’s talk was followed by a presentation by Yllka Buzhala from Centre for Research, Documentation and Publication of the results of other RRPP funded project ”Informal Power Networks, Political Patronage and Clientelism”. The discussion ended with a lively debate on lessons learnt and ways forward.

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