Mayor’s Wage and Public Procurement
42 Pages Posted: 6 Nov 2019
Date Written: November 2019
In this paper I run a regression discontinuity design analysis to document the causal effect of mayor’s wage on procurement outcomes in a large data base of public procurement contracts in Italy. To identify the wage effect, I use peculiarities of the Italian legislation where mayor’s remuneration varies at pre-determined population thresholds. My main results are as follows. First, a higher wage (i.e., my treatment) is not related with differences in aggregate measures of procurement: number of tenders, total procurement expenditure and the mean value of the contract in the municipality. Second, some of the ex-ante procurement outcomes are positively affected by mayor’s wage: the number of admitted offers and final rebates on the reserve price. Finally, a higher wage causes a significant decrease in the probability that the same firm is awarded a contract repeatedly. This paper is the first to document a direct relationship between mayor’s salary and public procurement.
Keywords: Public procurement, Local governments, Public wages
JEL Classification: H0, H5, H57, H7, H76
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