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Presentation of the paper
Political longevity and competition in public procurement auctions
Università di Tor Vergata
We investigate the relationship between the time politicians spend in office and the functioning of public procurement auctions. To this purpose, we develop a model where the repeated interaction between politicians and contractors increases the chance of corruption, as time reveals collusive types. We validate this theoretical prediction using a dataset on the Italian municipal governments and all the public procurement auctions they administered between 2000 and 2005. Identification is achieved through the introduction of a two-term limit in March 1993: since the reform was not retroactive, mayors appointed right before the implementation could be reelected for two additional terms, while the others for one only. Assuming no manipulation of election timing, we use the year of election (before or after 1993) as an instrument for the actual time in office. Our primary finding is that political longevity deteriorates public spending. In fact, it decreases the number of bidders and, most importantly, the winning rebate. Interestingly, we also find that the probability that the winning firm is an insider, or an incumbent, increases with political longevity.
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