Corruption in the Times of Pandemia
47 Pages Posted: 14 May 2020 Last revised: 27 Jul 2020
Date Written: July 25, 2020
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: Suggested Citation