Political Corruption in the Execution of Public Contracts

Discussion Papers 1607, 36 S.

Olga Chiappinelli

2016

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Published in: Journal of Economic Behavior and Organization 179 (2020) S.116–140

Abstract

This paper presents a novel theory of corruption in public procurement. It considers an agency setting of contract execution where the principal is a politician who can commit to a contract auditing policy. It is found that a benevolent politician, by choosing a sufficiently strict auditing, deters the contracting firm from padding costs, conversely, a selfish politician chooses a relatively lax auditing in order to create an incentive for cost-padding, and engages in corruption with the firm in case of detection. If the cost of auditing is high enough, even a benevolent politician might prefer to allow cost-padding.

Olga Chiappinelli

Research Associate in the Climate Policy Department



JEL-Classification: D73;D82;L51
Keywords: Corruption in procurement, Cost-padding, Selfish politician, Endogenous auditing, Procurement contracts, Principal-agent model
Frei zugängliche Version: (econstor)
http://hdl.handle.net/10419/146900

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