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Ukraine has introduced an interesting and unique e-procurement system with an extensive public monitoring platform. This platform appears to boost society’s efforts to tackle corruption and collusion in public procurement. In the project with Bruno Baranek and Leon Musolff (both Princeton University), we develop a new collusion detection algorithm and document the effects of the monitoring platform on the participation of collusive firms and other market outcomes.

We are very happy to receive funding for this project from the Weiss Fund at Harvard University. The project will be presented on the Workshop on Empirical Public and Political Economics at KU Leuven.

A new working paper (with Bruno Baranek) on the role of personal political connections in public procurement is now available as Discussion Paper of the Department of Economics at KU Leuven. 

Our findings, on detailed data on firm representatives’ political affiliations in the Czech Republic, show that favoritism to politically connected firms increases the price of procurement contracts by 8% of the estimated costs while no gains in terms of quality are generated. Interestingly, these adverse effects of political connections are not present for procurement contracts that get additional oversight from a higher level of the government, because they were co-funded by the European Union. Based on our estimates, the total procurement expenditures increased by 0.48% due to the favoritism. Finally, we discuss and document channels of such favoritism, and present suggestive evidence that politicians tailor technical specifications of projects to fit the comparative advantage of specific firms.

A think-tank IDEA of the CERGE-EI (a joint research center of the Charles University and the Czech Academy of Sciences) published our summary on the effects of political donations on the public procurement market in the Czech regions.

Our results show that an additional donation of 1 EUR is linked to additional procurement contracts in the value of 100 EUR in the following year. This may suggest a large misallocation of public funds that account for about 14.4% of Czech GDP. As shown in our recent CESifo Working Paper, this appears to be associated with a lower efficiency of public sector.

Links

• The study in Czech is available here https://idea.cerge-ei.cz/files/IDEA_Studie_10_2019_Dary_politickym_stranam/IDEA_Studie_10_2019_Dary_politickym_stranam.html.
• A summary in Ceska televize (the Czech broadcasting company) is avaiable here https://ct24.ceskatelevize.cz/veda/2919164-daruj-korunu-ziskas-stokorunu-na-zakazce-podporit-vladni-strany-v-cesku-se-vyplacelo .

The first version of the second chapter of my PhD thesis on  “Political donations, public procurement and government efficiency” (with Kristof De Witte and Benny Geys) is out as CESifo WP nr. 7591.

My first academic article (together with Benny Geys) has been published at European Economic Review (https://doi.org/10.1016/j.euroecorev.2018.11.004). A short less technical summary can be found on VoxEU (in English) and Roklen24 (in Czech).

In this article, we study whether and when donating to a political party induces favouritism in the allocation of procurement contracts. We find that firms increasing donationg to the party in power by $1 receive on average contracts in the value of $100 more in the year following the donation. Moreover, we show that contracting authorities tend to engage in various forms of strategic behaviour to favour donating firms such as lowering competition and manipulation around threshold between lower and higher discretion.