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Political Donations and the Allocation of Public Procurement Contracts

Titl, Vitezslav; Geys, Benny
Journal article, Peer reviewed
Accepted version
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URI
http://hdl.handle.net/11250/2576177
Date
2018
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  • Publikasjoner fra CRIStin - BI [633]
  • Scientific articles [1667]
Original version
European Economic Review, 2018, 111(January), 443-458   10.1016/j.euroecorev.2018.11.004
Abstract
We study whether and when firms’ donations to political parties induce favouritism in public procurement allocations. Our analysis builds on a unique, comprehensive dataset covering all public procurement contracts and all corporate donations to major political parties in the Czech Republic over the period from 2007 to 2014, and exploits changes in political control over regional governments within this period for identification purposes. We find that firms donating 10% more to a political party gaining (losing) power witness an increase (decrease) in the value of their public procurement contracts by 0.5–0.6%. Importantly, and in line with theoretical expectations, these effects only arise for contracts allocated under less restrictive procurement allocation processes. Assessing the underlying mechanisms, we show that donating firms receive more small contracts allocated under less regulated procurement procedures, face less competition in more regulated and open procurement procedures, and tend to win with bids further above the estimated cost of the procurement contract.
Publisher
Elsevier
Journal
European Economic Review

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