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Public Procurement and Rent-Seeking: The Case of Paraguay

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  • Auriol, Emmanuelle
  • Straub, Stéphane
  • Flochel, Thomas

Abstract

A model of entrepreneurial choices in an economy with a corrupt public procurement sector is built, providing predictions along two dimensions. First, corrupt public institutions operate by offering contracts without competition and more corrupt entities channel larger share of their budget in this way. Second, these firms enjoy extra returns, so that procurement related activities attract the best entrepreneurs. A large-scale microeconomic database, including all public procurement operations over a 4-year period in Paraguay, amounting annually to approximately 6% of the country’s GDP, is then used to corroborate these predictions.

Suggested Citation

  • Auriol, Emmanuelle & Straub, Stéphane & Flochel, Thomas, 2016. "Public Procurement and Rent-Seeking: The Case of Paraguay," World Development, Elsevier, vol. 77(C), pages 395-407.
  • Handle: RePEc:eee:wdevel:v:77:y:2016:i:c:p:395-407
    DOI: 10.1016/j.worlddev.2015.09.001
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    More about this item

    Keywords

    procurement; corruption; rent-seeking; development;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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