Corruption in the Times of Pandemia

47 Pages Posted: 14 May 2020 Last revised: 27 Jul 2020

See all articles by Jorge A. Gallego

Jorge A. Gallego

Universidad del Rosario

Mounu Prem

Universidad del Rosario

Juan F. Vargas

Universidad del Rosario

Date Written: July 25, 2020

Abstract

The public health crisis caused by the COVID-19 pandemic, coupled with the subsequent economic emergency and social turmoil, has pushed governments to substantially and swiftly increase spending. Because of the pressing nature of the crisis, public procurement rules and procedures have been relaxed in many places in order to expedite transactions. However, this may also create opportunities for 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 traditionally more prone to corruption react to the pandemic-led spending surge by using a larger proportion of discretionary non-competitive contracts and increasing their average value. This is especially so in the case of contracts to procure crisis-related goods and services. Additionally, in places that rank higher on our corruption scale, contracts signed during the emergency are more likely to have cost overruns, be awarded to campaign donors, and exhibit implementation inefficiencies. Our evidence suggests that easing procurement rules in response to large negative shocks may increase corruption, and thus governments that encourage spending should also bolster instances of monitoring and oversight.

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., Corruption in the Times of Pandemia (July 25, 2020). 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)

Universidad del Rosario ( email )

Casa Pedro Fermín
Calle 14 # 4-69
Bogota
Colombia

Juan F. Vargas

Universidad del Rosario ( email )

Calle 12 No. 6-25
Bogota, DC
Colombia

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