Tenure in Office and Public Procurement

Decio Coviello
2016 Social Science Research Network  
We study the impact of politicians' tenure in office on the outcomes of public procurement. To this purpose, we match a data set on the politics of Italian municipal governments to a data set on the procurement auctions they administered. In order to identify a causal relation, we apply two different identification strategies. First, we compare elections where the incumbent mayor barely won another term, with elections where the incumbent mayor barely lost and a new mayor took over. Second, we
more » ... ross-validate these estimates using a unique quasi-experiment determined by the introduction of a two-term limit on the mayoral office in March 1993. This reform granted one potential extra term to mayors appointed before the reform. The main result is that an increase in the mayor's tenure is associated with "worse" outcomes: fewer bidders per auction, a higher cost of procurement, a higher probability that the winner is local and that the same firm is awarded repeated auctions. Taken together, our estimates are informative of the possibility that time in office progressively leads to collusion between government officials and a few favored local bidders. Other interpretations receive less support in the data One important alternative explanation for our results is that more experienced mayors are better at mastering the procurement process (Padró i Miquel and Snyder, 2006; Dal Bó and Rossi, 2011) , and so they deliberately favor more expensive bidders because they are more likely to deliver works with better non-contractible characteristics. We investigate this possibility and study the delays in the delivery of the public works over a subsample of municipalities for which the data is available. We find that tenure in office actually implies higher delays, which reinforces the idea that time in office has a negative impact on the cost of procurement. A similar argument might also apply to the unobserved quality of the supplied works, which is not easily contractible. We repeated our analysis on an additional sample of goods and services purchased by the Italian municipalities. These, unlike public works, are more standardized in their quality (Bandiera et al., 2009) . Still, we find that tenure in office increases procurement costs, which suggests that the effects we identify in the main sample should not be confounded by the hidden quality of public works. The rest of the paper is organized as follows. In Section 2, we describe the Italian institutional background, and in Section 3, the data. In Section 4, we explain the identification strategy, and in Section 5, we present the main results. In Section 6, we discuss the results and alternative interpretations of the main evidence. We conclude with Section 7.
doi:10.2139/ssrn.2765159 fatcat:ycr6aidxn5eo5lmrtk2lqcavda