Tenure in Office and Public Procurement

Abstract

We investigate how the functioning of public procurement is affected by the time politicians have stayed in office. We match a data set on public procurement auctions by Italian municipalities to a data set on the politics of municipal governments. For each municipality, we relate the mayor’s tenure in office to several outcomes of the procurement process. The main result is that an increase in a mayor’s tenure (the number of terms in office) is associated with “worse” outcomes: fewer bidders per auction, a higher cost of procurement, and a higher probability that the winner is local and that the same firm is awarded repeated auctions. We make use of a quasi-experimental change in the electoral law (the introduction of a two-term limit) to argue that the correlation is in fact causal. Finally, we provide a simple theoretical model of repeated auctions in which these findings are consistent with time in office progressively leading to collusion between government officials and a few favored bidders.

Keywords: Tenure in office, Procurement auctions, Public works, Term limit

JEL Classification: D44, D72, D73, H57, H70