The Effect of Discretion on Procurement Performance
85 Pages Posted: 17 Nov 2015
Date Written: November 16, 2015
We run a regression discontinuity design analysis to document the causal effect of increasing buyers' discretion on procurement outcomes in a large database for public works in Italy. Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital and judicial efficiency in the region of the public buyers running the auctions.
Keywords: Procurement, Restricted Auctions, Regression Discontinuity, Regulatory Discretion
JEL Classification: D02, D44, C31, L11
Suggested Citation: Suggested Citation