An Economic Analysis of Debarment

32 Pages Posted: 19 Sep 2015

See all articles by Emmanuelle Auriol

Emmanuelle Auriol

University of Toulouse 1 - Toulouse School of Economics (TSE); University of Toulouse I - Advanced Research in Quantitative Applied Development Economics (ARQADE); CESifo (Center for Economic Studies and Ifo Institute)

Tina Søreide

University of Bergen, Faculty of Law; Chr. Michelsen Institute (CMI)

Date Written: September 11, 2015

Abstract

With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corruption and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, while in markets with low competition it may deter corruption as long as firms value public procurement contracts in the future and there is a certain risk of being detected in corruption. On the other hand, debarment -- when it works -- has an anti-competitive effect, and this effect will contribute to facilitate collusion between suppliers. Debarment may work as a tool against collusion, but only if targeting one firm at the time (such as a ring-leader or the specific beneficiary when the collusion is detected) -- and not all the members of a cartel. If designed with an understanding of the market mechanisms at play, debarment can deter both collusion and corruption, thus improving the results of public procurement. If so, most current debarment regimes need modification.

Keywords: Debarment, Corruption, Collusion, Procurement

JEL Classification: H57, K21, K23, K42, L41

Suggested Citation

Auriol, Emmanuelle and Søreide, Tina, An Economic Analysis of Debarment (September 11, 2015). NHH Dept. of Business and Management Science Discussion Paper No. 2015/23. Available at SSRN: https://ssrn.com/abstract=2662374 or http://dx.doi.org/10.2139/ssrn.2662374

Emmanuelle Auriol

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

University of Toulouse I - Advanced Research in Quantitative Applied Development Economics (ARQADE) ( email )

21 Allee de Brienne
Toulouse, 31000
France
+33 5 61 12 85 89 (Phone)
+33 5 61 12 86 37 (Fax)

HOME PAGE: http://www.idei.asso.fr/English/ECv/CvChercheurs/E

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Tina Søreide (Contact Author)

University of Bergen, Faculty of Law ( email )

Norway

Chr. Michelsen Institute (CMI) ( email )

P.O.Box 6033 Bedriftssenteret
N-5892 Bergen, 5006
Norway

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