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Building Political Collusion: Evidence from Procurement Auctions

Author

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  • Coviello, Decio

    (University of Rome Tor Vergata)

  • Gagliarducci, Stefano

    (University of Rome Tor Vergata)

Abstract

We investigate the relationship between the time politicians stay in office and the functioning of public procurement. To this purpose, we collect a data set on the Italian municipal governments and all the procurement auctions they administered between 2000 and 2005. Identification is achieved through the introduction of a two-term limit for the mayor in March 1993: since elections were not coordinated across cities, and previous terms were not counted in the limit, mayors appointed right before the reform could be reelected for two additional terms, while the others for one only. Our primary finding is that one extra term in office deteriorates public spending. In fact, it decreases the number of bidders and, most importantly, the winning rebate. Interestingly, we also find that the probability that the same firm is awarded more auctions, or that the winning firm is local, increases with time in office. These results are compatible with the predictions of a model of favoritism in repeated procurement auctions, where time reveals collusive types, thus increasing the value of illegal connections at the expense of higher procurement costs.

Suggested Citation

  • Coviello, Decio & Gagliarducci, Stefano, 2010. "Building Political Collusion: Evidence from Procurement Auctions," IZA Discussion Papers 4939, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4939
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    References listed on IDEAS

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    Cited by:

    1. Butler, Jeffrey V. & Carbone, Enrica & Conzo, Pierluigi & Spagnolo, Giancarlo, 2020. "Past performance and entry in procurement: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 179-195.
    2. Decio Coviello & Luigi Moretti & Giancarlo Spagnolo & Paola Valbonesi, 2018. "Court Efficiency and Procurement Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 826-858, July.
    3. Giuseppe Albanese & Federico Antellini Russo & Roberto Zampino, 2015. "Crime and public procurement, evidence from municipalities," Questioni di Economia e Finanza (Occasional Papers) 294, Bank of Italy, Economic Research and International Relations Area.
    4. Giorgio Bellettini & Carlotta Berti Ceroni & Giovanni Prarolo, 2013. "Persistence Of Politicians And Firms' Innovation," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 2056-2070, October.
    5. Gustavo Piga, 2011. "A Fighting Chance Against Corruption in Public Procurement?," Chapters, in: Susan Rose-Ackerman & Tina Søreide (ed.), International Handbook on the Economics of Corruption, Volume Two, chapter 5, Edward Elgar Publishing.
    6. Chiappinelli, Olga, 2020. "Political corruption in the execution of public contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 116-140.
    7. Mihaly Fazekas & Istvan Janos Toth & Lawrence Peter King, 2013. "Corruption manual for beginners - "Corruption techniques" in public procurement with examples from Hungary," CERS-IE WORKING PAPERS 1339, Institute of Economics, Centre for Economic and Regional Studies.
    8. Riccardo Camboni Marchi Adani & Paola Valbonesi, 2016. "Favouritism in scoring rule auctions," "Marco Fanno" Working Papers 0210, Dipartimento di Scienze Economiche "Marco Fanno".
    9. Mihaly Fazekas & Istvan Janos Toth & Lawrence Peter King, 2014. "Anatomy of grand corruption: A composite corruption risk index based on objective data," CERS-IE WORKING PAPERS 1403, Institute of Economics, Centre for Economic and Regional Studies.
    10. Luigi Moretti & Paola Valbonesi, 2012. "Subcontracting in Public Procurement: An Empirical Investigation," "Marco Fanno" Working Papers 0154, Dipartimento di Scienze Economiche "Marco Fanno".
    11. Mihály Fazekas & Lawrence Peter King, 2019. "Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe," Regulation & Governance, John Wiley & Sons, vol. 13(3), pages 405-430, September.
    12. Antonio Estache, 2014. "Infrastructure and Corruption: a Brief Survey," Working Papers ECARES ECARES 2014-37, ULB -- Universite Libre de Bruxelles.
    13. Giuseppe Albanese & Federico Antellini Russo & Roberto Zampino, 2016. "Criminalit? e scelte degli amministratori locali in tema di procedure di acquisto," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2016(2), pages 131-167.

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    More about this item

    Keywords

    procurement auction; collusion; public works; time in office;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • 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
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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