This dissertation includes three essays analyzing di↵erent aspects of public procurement. The first essay reviews the economic literature starting from an institutional framework that blends the contractual issues and the political and institutional environment. Particular attention is devoted to surveying the empirical evidence related to transaction costs and the role of discretion in the choice of private counterparts, governance issues related to corrupt exchanges, political capture of public procurement, and its mechanisms with particular regard to control of the bureaucracy. It is stressed that the same institutional setting jointly determines the transaction costs faced by the public-to-private transaction and the hidden corrupt exchange. The role of discretionary powers related to the selection mechanism of the suppliers in public procurement is then discussed in light of the evidence. The second and third essays are twin studies of the institutional determinants of the choice between auctions and negotiations or, framed di↵erently, whether to exercise discretion or not if given. Both share the same background focusing on two interrelated trade-o↵s: auctions versus negotiations, and discretion versus rules. On the one hand, auctions provide cost incentives but are ill-suited for ex-post adaptations, whereas negotiations provide more flexibility and allow for better screening of possible suppliers. On the other hand, auctions are believed to be less susceptible to corruption and favoritism than negotiations, precisely because of the lower discretion in the initial screening. Both chapters exploit empirical designs apt at estimating causal relationships using data from contracts issued by Italian municipalities. In detail, the second chapter examines the role of civil justice e↵ectiveness – the ability of civil courts to provide timely dispute resolution – on the choice between auctions and negotiations. Indeed, negotiations allow for the introduction of relational elements in a dynamic supply strategy, whereas auctions do not. However, the peculiar regulation of public procurement equips contracting authorities with tools to self-enforce contracts, among which is imposing penalties for delays. The empirical strategy is based on a spatial-discontinuity design, refined by coarsened-exact-matching. The estimations showcase a 3% to 7% reduction in the likelihood of choosing private negotiations for an increase of one year in judicial delay. It is argued that regulation flips the sign of the expected relationship: ine↵ective courts act as a further contractual defense for public administrations. Finally, the third chapter investigates the role of political competition in the choice between auctions and negotiations. Indeed, political competition is theoretically supposed to either (a) reduce corruption, and (b) increase defensive behaviors to preempt possible probity challenges. Either way, the expected relationship is a reduced likelihood of using negotiated procedures in favor of more auctions. The analysis is split into two parts. The first part shows no significant correlation between the 1 outcome of interest and political competition, measured through indexes broadly used in literature. The second part exploits the entry of a political party with anti-establishment and probity-based political positions, thus raising the level of political competition. The staggered timeframe of local elections allows the estimation of the average treatment e↵ect on the treated. Estimation is done with nearest-neighbor and coarsened-exact matching, showcasing a reduced likelihood of using negotiated procedures ranging from 4% to 9%. The sign therefore confirms the initial hypothesis, although it is not possible to discern which of the two theoretical interpretations lies behind the results.
Three essays on the institutions of public procurement(2024 Sep 11).
Three essays on the institutions of public procurement
CAVALIERI, ALESSANDRO
2024-09-11
Abstract
This dissertation includes three essays analyzing di↵erent aspects of public procurement. The first essay reviews the economic literature starting from an institutional framework that blends the contractual issues and the political and institutional environment. Particular attention is devoted to surveying the empirical evidence related to transaction costs and the role of discretion in the choice of private counterparts, governance issues related to corrupt exchanges, political capture of public procurement, and its mechanisms with particular regard to control of the bureaucracy. It is stressed that the same institutional setting jointly determines the transaction costs faced by the public-to-private transaction and the hidden corrupt exchange. The role of discretionary powers related to the selection mechanism of the suppliers in public procurement is then discussed in light of the evidence. The second and third essays are twin studies of the institutional determinants of the choice between auctions and negotiations or, framed di↵erently, whether to exercise discretion or not if given. Both share the same background focusing on two interrelated trade-o↵s: auctions versus negotiations, and discretion versus rules. On the one hand, auctions provide cost incentives but are ill-suited for ex-post adaptations, whereas negotiations provide more flexibility and allow for better screening of possible suppliers. On the other hand, auctions are believed to be less susceptible to corruption and favoritism than negotiations, precisely because of the lower discretion in the initial screening. Both chapters exploit empirical designs apt at estimating causal relationships using data from contracts issued by Italian municipalities. In detail, the second chapter examines the role of civil justice e↵ectiveness – the ability of civil courts to provide timely dispute resolution – on the choice between auctions and negotiations. Indeed, negotiations allow for the introduction of relational elements in a dynamic supply strategy, whereas auctions do not. However, the peculiar regulation of public procurement equips contracting authorities with tools to self-enforce contracts, among which is imposing penalties for delays. The empirical strategy is based on a spatial-discontinuity design, refined by coarsened-exact-matching. The estimations showcase a 3% to 7% reduction in the likelihood of choosing private negotiations for an increase of one year in judicial delay. It is argued that regulation flips the sign of the expected relationship: ine↵ective courts act as a further contractual defense for public administrations. Finally, the third chapter investigates the role of political competition in the choice between auctions and negotiations. Indeed, political competition is theoretically supposed to either (a) reduce corruption, and (b) increase defensive behaviors to preempt possible probity challenges. Either way, the expected relationship is a reduced likelihood of using negotiated procedures in favor of more auctions. The analysis is split into two parts. The first part shows no significant correlation between the 1 outcome of interest and political competition, measured through indexes broadly used in literature. The second part exploits the entry of a political party with anti-establishment and probity-based political positions, thus raising the level of political competition. The staggered timeframe of local elections allows the estimation of the average treatment e↵ect on the treated. Estimation is done with nearest-neighbor and coarsened-exact matching, showcasing a reduced likelihood of using negotiated procedures ranging from 4% to 9%. The sign therefore confirms the initial hypothesis, although it is not possible to discern which of the two theoretical interpretations lies behind the results.File | Dimensione | Formato | |
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