Public Procurement and Rent-Seeking: The Case of Paraguay

Abstract

A model of entrepreneurial choices in an economy with a corrupt public procurement sector is built, providing predictions along two main dimensions. First, corruption is more frequent in sectors where public institutions are large buyers. Second, firms favoured with corrupt contracts enjoy extra returns, so that procurement related activities attract the best entrepreneurs. A large scale microeconomic database, including all public procurement operations over a 4 year period in Paraguay, amounting annually to approximately 6% of the country's GDP, is then used to corroborate these predictions keywords: Procurement, Corruption, Rent-seeking, Development JEL codes: H57, D73, D72, O5 * E . A u rio l: To u lo u se S ch o o l o f E c o n o m ic s (A R Q A D E a n d ID E I), ea u rio l@ c ict.fr. S . S tra u b : To u lo u se S ch o o l o f E con o m ics (A R Q A D E a n d ID E I), ste p h a n e.stra u b @ u n iv -tlse1 .fr. T . F lo ch el: U n ivers ity o f E d inb u rg h , t.fl o ch el@ ed .a c .u k . We a re g ra tefu l to M a ría d el P ila r C a lliz o a n d O sca r G av ilá n fro m Tra n sp a re n c ia P a ra g u ay fo r m a k in g th e p ro cu rem ent d a ta ava ila b le a n d fo r th e ir su p p o rt d u rin g th e s tay o f th e th ird a u th o r in P a ra g u ay. We th a n k G a n i A ld a sh ev , J ea n -M a rie B a la n d , L u c B e h a g h el, D av id B row n , E rn es to D a l B ó , J ea n -J a cq u es D eth ier, P ie rre D u b o is, R a fa el D i Te lla , E d u a rd o E ng el, A nto n io E sta ch e, M a rc el Fa fch a m p s, R u i d e F ig u eired o , P a u l G ertler, M a ia G u ell, M a rc G u rg a n d , P a u l H a re, Ta tia n a K o rn ien ko , S y lv ie L a m b ert, R o c co M a cch iave llo , D av id M a rtim o rt, J ea n -P h ilip p e P la ttea u , S ev i R o d ríg u e z M o ra , Fra n ço is S a la n ié, J u lio S á n ch ez L a sp in a , W ilfried S a n d -Z a ntm a n , L a u ra S ch echte r, F io n a S co tt-M o rto n , G ia n c a rlo S p a g n o lo , P a b lo S p iller, S teve Ta d elis, M a ria n o To m m a si, O liver W illia m s on a n d sem in a r p a rticip a nts a t B erkele y, C E R D I, E d inb u rg h , G u a n a ju a to , N a m u r, O x fo rd , P a ris , R o m e, S to ck h o lm , To u lo u se, th e Wo rld B a n k a n d Ya le fo r u se fu l co m m ents.

Does E-Government Improve Government Capacity? Evidence from Tax Compliance Costs, Tax Revenue, and Public Procurement Competitiveness

“…High tax compliance costs due to cumbersome regulations and harassment by tax officials deter investment, encourage tax evasion, and undermine economic growth (Hindriks et al, 1999;Djankov et al, 2006;Coolidge, 2012;Alm et al 2015;Jerbashian and Kochanova, 2016a). The public procurement of goods and services is often rife with collusive practices and corruption, resulting in the misallocation or waste of resources and poor quality infrastructure (Auriol, 2016;Center for Global Development, 2014).…”

Percepção da corrupção em ambiente acadêmico: análise empírica a partir de alunos do curso de ciências contábeis da Universidade Federal do Ceará (UFC)

“…Basicamente, pode-se organizálos em 2 (dois) seguimentos: os de origem empírica e aqueles que se baseiam em aproximações teóricas. Considerando o embasamento teórico, podem-se citar um conjunto de teorias que busca explicar o fenômeno por meio do viés econômico: Teoria da Agência (Teichmann, 2017), Teoria dos Custos de Transação (Karhunen & Ledyaeva, 2012), Teoria da Eleição Pública (Mbaku, 2008) e Teoria dos Caçadores de Renda (rent seeking) (Auriol, Straub & Flochel, 2016). O uso de arcabouço teórico tem por finalidade oferecer maior solidez teórica ao estudo do fenômeno, devido que o emprego das teorias econômicas possui elementos que podem explicar os fatores causais e a propagação da corrupção.…”

Perception of corruption in academic environment: empirical analysis from accounting students at the Federal University of Ceará (UFC)

“…Basically, these studies can be organized in two segments: those with an empirical background and those that are based on theoretical approaches. Considering the theoretical approach, a set of theories that aim to explain the phenomenon through an economic bias can be mentioned: Theory of Agency (Teichmann, 2017), Theory of Transaction Costs (Karhunen & Ledyaeva, 2012), Theory of Public Election (Mbaku, 2008) and Theory of rent seeking (Auriol, Straub & Flochel, 2016). The use of theoretical framework aims to offer a greater theoretical consistency to the study of the phenomenon, since the use of economic theories have elements that may explain the driving factors and the dissemination of corruption.…”