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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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    Citations

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    Cited by:

    1. Günther G. Schulze & Nikita Zakharov, 2018. "Corruption in Russia - Historic Legacy and Systemic Nature," CESifo Working Paper Series 6864, CESifo Group Munich.
    2. repec:eee:poleco:v:52:y:2018:i:c:p:55-74 is not listed on IDEAS
    3. Jonathan Lehne & Jacob N. Shapiro & Oliver Vanden Eynde, 2016. "Building connections: Political corruption and road construction in India," Working Papers halshs-01349350, HAL.
    4. Audinga Baltrunaite & Cristina Giorgiantonio & Sauro Mocetti & Tommaso Orlando, 2018. "Discretion and supplier selection in public procurement," Temi di discussione (Economic working papers) 1178, Bank of Italy, Economic Research and International Relations Area.
    5. 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.
    6. Mass, Helene & Fugger, Nicolas & Gretschko, Vitali & Wambach, Achim, 2017. "Imitation perfection - a simple rule to prevent discrimination in procurement," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168217, Verein für Socialpolitik / German Economic Association.
    7. repec:eee:deveco:v:131:y:2018:i:c:p:62-78 is not listed on IDEAS
    8. 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.
    9. repec:eee:ecosys:v:41:y:2017:i:1:p:52-67 is not listed on IDEAS
    10. Lehne, Jonathan & Shapiro, Jacob N. & Vanden Eynde, Oliver, 2018. "Building connections: Political corruption and road construction in India," Journal of Development Economics, Elsevier, vol. 131(C), pages 62-78.

    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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