Politics and Procurement: Evidence from Cleaning Contracts
University of Jyväskylä - School of Business and Economics
University of Umea - Department of Economics
KU Leuven - Faculty of Business and Economics (FBE); CEPR
November 1, 2007
HECER Discussion Paper No. 196
We study the effects of politics on public procurement in Swedish municipalities in 1990-98 using data on cleaning services. No procuring municipality committed to a standard auction format or to an explicit scoring rule. Political identity of the governing party is not correlated with the decision to procure, the decision to restrict entry, or the number of invited firms. However, left-wing municipalities are more likely not to invite "in-house firms". In our data, the lowest bidder does not win 58% of the time, and conditional on the lowest bid not winning, the municipalities end up paying a premium of 43%. Our discrete choice analysis shows that while all municipalities are price sensitive, left-wing councils 1.5 as price sensitive as right-wing councils. Conditional on bids, left-wing councils are more likely to choose a local firm. Politics thus matter and affect procurement outcomes.
Number of Pages in PDF File: 43
Keywords: Efficiency, favoritism, politics, public procurement
JEL Classification: H57, D44, P16working papers series
Date posted: January 14, 2008 ; Last revised: August 13, 2009
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