Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia

36 Pages Posted: 4 Aug 2014 Last revised: 28 Jan 2015

See all articles by Sean Lewis-Faupel

Sean Lewis-Faupel

University of Wisconsin, Platteville

Yusuf Neggers

Harvard University - Harvard Kennedy School (HKS)

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Rohini Pande

Harvard University - Harvard Kennedy School (HKS)

Date Written: July 2014

Abstract

Poorly functioning, and often corrupt, public procurement procedures are widely faulted for the low quality of infrastructure provision in developing countries. Can electronic procurement (e-procurement), which reduces both the cost of acquiring tender information and personal interaction between bidders and procurement officials, ameliorate these problems? In this paper we develop a unique micro-dataset on public works procurement from two fast-growing economies, India and Indonesia, and use regional and time variation in the adoption of e-procurement across both countries to examine its impact. We find no evidence that e-procurement reduces prices paid by the government, but do find that it is associated with quality improvements. In India, where we observe an independent measure of construction quality, e-procurement improves the average road quality, and in Indonesia, e-procurement reduces delays in completion of public works projects. Bidding data suggests that an important channel of influence is selection -- regions with e-procurement have a broader distribution of winners, with (better) winning bidders more likely to come from outside the region where the work takes place. On net, the results suggest that e-procurement facilitates entry from higher quality contractors.

Suggested Citation

Lewis-Faupel, Sean and Neggers, Yusuf and Olken, Benjamin A. and Pande, Rohini, Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia (July 2014). NBER Working Paper No. w20344. Available at SSRN: https://ssrn.com/abstract=2475691

Sean Lewis-Faupel (Contact Author)

University of Wisconsin, Platteville ( email )

1 University Plaza
Platteville, WI 53818
United States

Yusuf Neggers

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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617-253-6833 (Phone)
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National Bureau of Economic Research (NBER) ( email )

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617-588-1407 (Phone)

Harvard University - Society of Fellows

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United States

Rohini Pande

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-384-5267 (Phone)
617-495-2575 (Fax)

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