Inefficient Procurement in Times of Pandemia

41 Pages Posted: 14 May 2020 Last revised: 11 May 2021

See all articles by Jorge A. Gallego

Jorge A. Gallego

Universidad del Rosario

Mounu Prem

Einaudi Institute for Economics and Finance (EIEF)

Juan F. Vargas

Universidad del Rosario

Date Written: May 11, 2021

Abstract

The public health and economic crisis caused by the COVID-19 pandemic has pushed governments to substantially and swiftly increase spending. Consequently, public procurement rules have been relaxed in many places to expedite transactions. However, this may also create opportunities for inefficiency and corruption. Using contract-level information on public spending from Colombia’s e-procurement platform, and a difference-in-differences identification strategy, we find that municipalities classified by a machine learning algorithm as more prone to corruption react to the spending surge by using a larger proportion of discretionary non-competitive contracts and increasing their average value, especially to procure crisis-related items. In these places, contracts signed during the emergency are more likely to have cost overruns, be awarded to campaign donors, and exhibit a range of implementation inefficiencies. Our evidence suggests that large negative shocks such as the recent COVID-19 pandemic may increase waste and corruption.

Keywords: Corruption, COVID-19, Public procurement, Machine learning

JEL Classification: H57, H75, D73, I18

Suggested Citation

Gallego, Jorge A. and Prem, Mounu and Vargas, Juan F., Inefficient Procurement in Times of Pandemia (May 11, 2021). Available at SSRN: https://ssrn.com/abstract=3600572 or http://dx.doi.org/10.2139/ssrn.3600572

Jorge A. Gallego

Universidad del Rosario ( email )

Calle 12 No. 6-25
Bogota, DC
Colombia

Mounu Prem (Contact Author)

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Juan F. Vargas

Universidad del Rosario ( email )

Calle 12 No. 6-25
Bogota, DC
Colombia

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