IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Political Firms, Public Procurement, and the Democratization Process

  • Straub, Stéphane

In 2008, an opposition coalition defeated the Paraguayan Colorado Party, which had been in power for 61 years, including 35 years of the longest dictatorship in South America. Using data of all the public procurement transactions from 2004 through 2011 and the political connections of the 700 largest public providers, this paper documents how the volume of contracts received by connected firms evolved after this landmark political change. It shows that firms connected with the first ring of power were punished and that there were efficiency gains, mostly in the form of institutions shifting to bigger and more competitive contracts, but that these gains were constrained by the scarcity of entrepreneurs able to step in to replace firms connected to the previous regime. This demonstrates that the potential economic benefits of democratization are hampered by the perverse rent-seeking entrepreneurial incentives created by a long-term single-party authoritarian regime.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://idei.fr/sites/default/files/medias/doc/wp/2014/wp_idei_817.pdf
File Function: Full text
Download Restriction: no

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 817.

as
in new window

Length:
Date of creation: 29 Jan 2014
Date of revision:
Handle: RePEc:ide:wpaper:27861
Contact details of provider: Postal:
Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 Allée de Brienne, 31000 TOULOUSE

Phone: +33 (0)5 61 12 85 89
Fax: + 33 (0)5 61 12 86 37
Web page: http://www.idei.fr/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Fisman David & Fisman Raymond J. & Galef Julia & Khurana Rakesh & Wang Yongxiang, 2012. "Estimating the Value of Connections to Vice-President Cheney," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(3), pages 1-20, December.
  2. Donald Richards, 2008. "Transition and reform in a predatory state: the case of Paraguay," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 11(2), pages 101-114.
  3. Auriol, Emmanuelle & Flochel, Thomas & Straub, Stéphane, 2011. "Public Procurement and Rent-Seeking: The Case of Paraguay," TSE Working Papers 11-224, Toulouse School of Economics (TSE), revised Mar 2015.
  4. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1991. "The Allocation of Talent: Implications for Growth," Scholarly Articles 27692664, Harvard University Department of Economics.
  5. Joachim Voth & Thomas Ferguson, 2008. "Betting on Hitler: The value of political connections in Nazi Germany," Economics Working Papers 1183, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, vol. 96(1), pages 369-386, March.
  7. Thomas Ferguson & Hans-Joachim Voth, 2008. "Betting on Hitler—The Value of Political Connections in Nazi Germany," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 101-137.
  8. Renaud Coulomb & Marc Sangnier, 2014. "The Impact of Political Majorities on Firm Value: Do Electoral Promises or Friendship Connections Matter?," AMSE Working Papers 1414, Aix-Marseille School of Economics, Marseille, France, revised May 2014.
  9. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 269-92, April.
  10. Asim Ijaz Khwaja & Atif Mian, 2005. "Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1371-1411.
  11. Straub, Stéphane, 1998. "Evolución macroeconómica del Paraguay 1989-1997: burbuja de consumo y crisis financiera," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
  12. Esther Duflo, 2000. "Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment," NBER Working Papers 7860, National Bureau of Economic Research, Inc.
  13. Claessens, Stijn & Feijen, Erik & Laeven, Luc, 2007. "Political Connections and Preferential Access to Finance: The Role of Campaign Contributions," CEPR Discussion Papers 6045, C.E.P.R. Discussion Papers.
  14. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
  15. Bandiera, Oriana & Prat, Andrea & Valletti, Tommaso, 2008. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," CEPR Discussion Papers 6799, C.E.P.R. Discussion Papers.
  16. Seema Jayachandran, 2004. "The Jeffords Effect," UCLA Economics Online Papers 297, UCLA Department of Economics.
  17. Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
  18. Li, Hongbin & Meng, Lingsheng & Wang, Qian & Zhou, Li-An, 2008. "Political connections, financing and firm performance: Evidence from Chinese private firms," Journal of Development Economics, Elsevier, vol. 87(2), pages 283-299, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ide:wpaper:27861. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.