Speed of Payment in Procurement Contracts: The Role of Political Connections

47 Pages Posted: 3 Apr 2024

Date Written: April 2, 2024


We provide evidence of a new channel through which politicians can exchange favors with campaign donors: earlier payment in procurement contracts. We exploit an electoral reform in Brazil that bans corporate contributions and partially breaks down the relationship between donors and politicians. Using a within-firm difference-in-differences identification strategy, we find that connected firms experience longer payment terms post-reform. The effect is larger in municipalities with low liquidity, where payment delays are more common, and for contracts awarded through a competitive tendering process. Our results point to the importance of designing rules that curb discretion over the contract execution process in government purchases.

Keywords: Payment timeliness, public procurement, political connections

JEL Classification: D72, H57, H72

Suggested Citation

Dahis, Ricardo and Ricca, Bernardo and Scot, Thiago, Speed of Payment in Procurement Contracts: The Role of Political Connections (April 2, 2024). Available at SSRN: https://ssrn.com/abstract=3934021 or http://dx.doi.org/10.2139/ssrn.3934021

Ricardo Dahis

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, 3800

Bernardo Ricca

Insper ( email )

R Quata 300
Sao Paulo, 04542-030

Thiago Scot (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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