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Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data

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  • Maxim Mironov
  • Ekaterina Zhuravskaya

Abstract

We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel—cash is tunneled to politicians in exchange for procurement contracts—and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the "efficient grease" hypothesis: in more corrupt localities, procurement contracts go to unproductive firms. (JEL D22, D72, H57, K42, P26, P31, P37)

Suggested Citation

  • Maxim Mironov & Ekaterina Zhuravskaya, 2016. "Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data," American Economic Journal: Economic Policy, American Economic Association, vol. 8(2), pages 287-321, May.
  • Handle: RePEc:aea:aejpol:v:8:y:2016:i:2:p:287-321 Note: DOI: 10.1257/pol.20140188
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    References listed on IDEAS

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    1. Baicker, Katherine & Chernew, Michael E. & Robbins, Jacob A., 2013. "The spillover effects of Medicare managed care: Medicare Advantage and hospital utilization," Journal of Health Economics, Elsevier, vol. 32(6), pages 1289-1300.
    2. Katherine Baicker & Michael Chernew & Jacob Robbins, 2013. "The Spillover Effects of Medicare Managed Care: Medicare Advantage and Hospital Utilization," NBER Working Papers 19070, National Bureau of Economic Research, Inc.
    3. Buntin, Melinda Beeuwkes & Zaslavsky, Alan M., 2004. "Too much ado about two-part models and transformation?: Comparing methods of modeling Medicare expenditures," Journal of Health Economics, Elsevier, vol. 23(3), pages 525-542, May.
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    Cited by:

    1. Muraközy, Balázs & Telegdy, Álmos, 2016. "Political incentives and state subsidy allocation: Evidence from Hungarian municipalities," European Economic Review, Elsevier, vol. 89(C), pages 324-344.
    2. repec:hal:wpaper:halshs-01349350 is not listed on IDEAS
    3. Ozlem Akin & Nicholas S. Coleman & Christian Fons-Rosen & José-Luis Peydró, 2016. "Political Connections: Evidence From Insider Trading Around TARP," Working Papers 935, Barcelona Graduate School of Economics.
    4. Mass, Helene & Fugger, Nicolas & Gretschko, Vitali & Wambach, Achim, 2017. "Imitation perfection: A simple rule to prevent discrimination in procurement," ZEW Discussion Papers 17-058, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. repec:eee:ecosys:v:41:y:2017:i:1:p:52-67 is not listed on IDEAS

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P37 - Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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