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Active and Passive Waste in Government Spending: Evidence from a Policy Experiment

  • Andrea Prat
  • Oriana Bandiera
  • Tommaso Valletti

We propose a distinction between active and passive waste as determinants of the cost of public services. Active waste entails utility for the public decision maker, whereas passive waste does not. We analyze purchases of standardized goods by Italian public bodies and exploit a policy experiment associated with a national procurement agency. We find that: (i) some public bodies pay systematically more than others for equivalent goods; (ii) differences are correlated with governance structure; (iii) the variation in prices is principally due to variation in passive rather than active waste; and (iv) passive waste accounts for 83 percent of total estimated waste. (JEL H11, H57, H83)

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 843644000000000100.

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Date of creation: 22 Jul 2007
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Handle: RePEc:cla:levrem:843644000000000100
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