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Public procurement in law and practice

Bosio, Erica, Djankov, Simeon, Glaeser, Edward and Shleifer, Andrei (2022) Public procurement in law and practice. American Economic Review, 112 (4). 1091 - 1117. ISSN 0002-8282

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Identification Number: 10.1257/aer.20200738

Abstract

We examine a new dataset of public procurement laws, practice, and outcomes in 187 countries. We measure regulation as restrictions on the discretion of the procuring entities. We find that laws and practice are highly correlated with each other across countries, and better practice is correlated with better outcomes, but laws themselves are not correlated with outcomes. A closer look shows that stricter laws correlate with improved outcomes, but only in countries with low public sector capacity. We present a model of procurement in which both regulatory rules and public sector capacity determine procurement outcomes. In the model, regulation is effective in countries with low public sector capacity, but not in countries with high capacity because it inhibits the socially optimal exercise of discretion to exclude low quality bidders. (JEL D73, H11, H57, K12, K42, O17)

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aer
Additional Information: © 2022 American Economic Association
Divisions: Financial Markets Group
Subjects: H Social Sciences > HB Economic Theory
K Law > K Law (General)
H Social Sciences > HD Industries. Land use. Labor
JEL classification: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy; Administrative Processes in Public Organizations; Corruption
H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
H - Public Economics > H5 - National Government Expenditures and Related Policies > H57 - Procurement
K - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law
K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements: Legal, Social, Economic, and Political
Date Deposited: 19 May 2022 14:39
Last Modified: 14 Jun 2022 09:57
URI: http://eprints.lse.ac.uk/id/eprint/115158

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