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Nonlinear Incentive Schemes and Corruption in Public Procurement: Evidence from the Czech Republic

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  • Jan Palguta

Abstract

This article uses data on Czech public procurement contracts from 2005 - 2010 in order to uncover patterns suggestive of corrupt behavior of procuring officials. Using polynomial regressions and local linear density estimators, the article provides evidence that procurement officials manipulate anticipated values of procurements so that contracts can be awarded through less transparent procedures with restricted entry. Manipulations manifest through emergence of sharp discontinuities in the anticipated value distribution. Procurements excessively bunch below statutory thresholds, which determine officials’ scope of discretion, entry-restrictiveness and transparency of the contract-awarding process. The first appearance of discontinuities coincides almost exactly with thresholds being introduced into the procurement legislation. Manipulations occur only in procedures restricted by thresholds and are prevalent only among a narrow group of procuring bodies. The last finding is consistent with manipulations being driven by corruption of procurement officials. Manipulations concern 8.6% of all below-limit procurements.

Suggested Citation

  • Jan Palguta, 2013. "Nonlinear Incentive Schemes and Corruption in Public Procurement: Evidence from the Czech Republic," CERGE-EI Working Papers wp483, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp483
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    Cited by:

    1. Jekaterina Kuliomina, 2018. "Does Election of an Additional Female Councilor Increase Women's Candidacy in the Future?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 15(1), pages 37-81, June.
    2. Jan Palguta, 2014. "Concealed Ownership of Contractors, Manipulation of Tenders and the Allocation of Public Procurement Contracts," CERGE-EI Working Papers wp501, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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    More about this item

    Keywords

    public procurement; corruption; manipulation; incentives; statutory thresholds;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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