Political donations, public procurement and government efficiency
CESifo, Munich, 2019
CESifo Working Paper No. 7591
![](https://cesifo.org/DocImg/cesifo1_wp7591.jpg?c=1689237000)
Firms’ political donations can induce distortions in the allocation of public procurement contracts. In this article, we employ an advanced non-parametric efficiency model to study the public sector (cost) efficiency implications of such distortions. Using a unique dataset covering the Czech regions over the 2007-2014 period, we find that the efficiency of public good provision is lower when a larger share of public procurement contracts is awarded to firms donating to the party in power (‘party donors’). We link this efficiency difference to two underlying mechanisms: i.e. shifts in procurement contract allocations from firms with previous procurement experience to party donors, and the use of less restrictive allocation procedures that benefit party donors.
Public Finance
Public Choice