American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data
American Economic Journal: Economic Policy
vol. 8,
no. 2, May 2016
(pp. 287–321)
(Complimentary)
Abstract
We provide evidence of corruption in allocation of public procurement and assess its efficiency. Firms with procurement revenue increase tunneling around regional elections, whereas neither tunneling of firms without procurement revenue, nor legitimate business of firms with procurement exhibits a political cycle. Data are consistent with the corruption channel—cash is tunneled to politicians in exchange for procurement contracts—and inconsistent with alternative channels. Using the strength of correlation between procurement revenue and tunneling around elections as a proxy for local corruption, we reject the "efficient grease" hypothesis: in more corrupt localities, procurement contracts go to unproductive firms. (JEL D22, D72, H57, K42, P26, P31, P37)Citation
Mironov, Maxim, and Ekaterina Zhuravskaya. 2016. "Corruption in Procurement and the Political Cycle in Tunneling: Evidence from Financial Transactions Data." American Economic Journal: Economic Policy 8 (2): 287–321. DOI: 10.1257/pol.20140188Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D72 Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H57 National Government Expenditures and Related Policies: Procurement
- K42 Illegal Behavior and the Enforcement of Law
- P26 Socialist Systems and Transitional Economies: Political Economy; Property Rights
- P31 Socialist Enterprises and Their Transitions
- P37 Socialist Systems and Transitional Economies: Legal Institutions; Illegal Behavior