Political Donations, Public Procurement and Government Efficiency
24 Pages Posted: 19 Apr 2019
Date Written: 2019
Firms’ political donations can induce distortions in the allocation of public procurement contracts. In this article, we employ an advanced non-parametric efficiency model to study the public sector (cost) efficiency implications of such distortions. Using a unique dataset covering the Czech regions over the 2007-2014 period, we find that the efficiency of public good provision is lower when a larger share of public procurement contracts is awarded to firms donating to the party in power (‘party donors’). We link this efficiency difference to two underlying mechanisms: i.e. shifts in procurement contract allocations from firms with previous procurement experience to party donors, and the use of less restrictive allocation procedures that benefit party donors.
Keywords: political connections, non-parametric efficiency analysis, benefit-of-the-doubt
JEL Classification: H570, D720, C230
Suggested Citation: Suggested Citation