NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Public Procurement in Law and Practice

Erica Bosio, Simeon Djankov, Edward L. Glaeser, Andrei Shleifer

NBER Working Paper No. 27188
Issued in May 2020
NBER Program(s):Development Economics, Public Economics

We examine a new data set of laws and practices governing public procurement, as well as procurement outcomes, in 187 countries. We measure regulation as restrictions on discretion of the procuring agents. We find that laws and practices are highly correlated with each other across countries, better practices are correlated with better outcomes, but laws themselves are not correlated with outcomes. To shed light on this puzzle, we present a model of procurement in which both regulation and public sector capacity determine the efficiency of procurement. In the model, regulation is effective in countries with low public sector capacity, and detrimental in countries with high public sector capacity because it inhibits the socially optimal exercise of discretion. We find evidence broadly consistent with this prediction: regulation of procurement improves outcomes, but only in countries with low public sector capacity.

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Document Object Identifier (DOI): 10.3386/w27188

 
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